UPI Credit Card Payments: Fraud Risks And How To Avoid Them

According to a report by Kiwi, a fintech company which offers credit on UPI services, people holding UPI-enabled credit cards are making 40 transactions per month on average, which is eight times higher than traditional credit card users. The rate at which UPI-enabled credit card transactions are growing is 20 per cent monthly, along with a 5 per cent rise in average monthly spending. Kiwi also revealed that in 2024, the average monthly spending cap per user was Rs 40,000. 

Benefits of UPI Credit Cards

These cards not only ease the burden of carrying a physical credit card every time you go out. But this is not the only benefit these cards pose, here are some of the benefits:

• Rewards: Linking your credit cards with UPI enables the user to get rewards on almost all transactions, irrespective of their value—a significant advantage compared to debit cards. But for some cards, there are minimum thresholds, for example, if you spend more than Rs 2,000, you will earn certain points, say 60. 

• Transaction Limits: These cards also offer higher transaction limits than that of debit cards. Usually debit cards offer a daily transaction limit range from Rs 20,000 to Rs 50,000. But UPI linked credit cards offer a daily transaction limit of up to Rs 1 lakh, but it can also be extended up to Rs 2 lakh for certain merchant category codes (MCCs). 

• Cashbacks: Other than rewards, UPI-linked credit cards also offer cashbacks. For example, some cards offer 5 per cent cashback on any two categories—such as dining and grocery, or entertainment and travel—by collaborating with their retail partners. Some cards also offer 1 per cent unlimited cashback on all purchases made through these cards. You are also eligible to customise these cards according to your spending habits by choosing a billing cycle that suits you. 

The Alarming Rise of UPI Frauds

UPFI fraud complaints have been on the rise in recent years. India saw around 13.4 lakh UPI fraud cases in the fiscal year 2023-24, which accounted for a loss of Rs 1,087 crore. This is a rise of 85 per cent from the 7.25 lakh cases valued at Rs 573 crore in the previous year. The trend has been followed until 2024-25 as well, with 6.32 lakh cases reported until September that have resulted in losses to the tune of Rs 485 crore.

Common Scams

• Phishing Frauds: Frauds impersonate bank personnel or payment processors, misleading clients to reveal their UPI PINs and OTPs.

• QR Code Frauds: Impostors distribute duplicate QR codes that, when scanned, authenticate unsolicited fund transfers rather than receive money.

• Remote Access Attacks: Clients are misled to download harmful applications that give impostors access to their phones remotely, which can facilitate unauthorised transactions.

• Impersonation Customer Care Calls: The fraudsters impersonate bank officials and request users to "authenticate" credit card information, resulting in identity theft and exploitation.

According to Sameer Mathur, managing director and founder of Roinet Solution, a phygital (physical+digital) financial services provider in rural and semi-urban areas, "UPI credit card transactions are likely to be vulnerable to fraud due to the fact that they are hybrid. Both are being integrated into one and thus both are more prone to attack, in this scenario, phishing attacks where the fraudsters exploit both UPI and credit card information through simulated payment requests or phoney websites. Compared to normal UPI transactions with 2FA, UPI credit card transactions could potentially have weaker security layers, making them vulnerable to scams". 

"Moreover, the complexity of the transactions provides avenues for loopholes in checks, and the association of credit card details in UPI enhances the risk of data compromise. In safety matters, customers should avoid payment links from unknown sources, verify transactions periodically, and form robust PINs and passwords. Although UPI credit cards are easy to use, caution and stringent security measures are required so that fraud risks are low", adds Mathur. 

Preventing UPI Credit Card Scams

1. Never Share Your UPI PIN or OTP: Banks and original payment wallets never request your information. In case someone demands it, it is an attempt at a scam.

2. Verify Merchant Details Before Payments: Reverify recipient details before making payments. Scammers pose as legitimate merchants.

3. Be Cautious of QR Codes: Never scan QR codes sent by strangers, especially those claiming to transfer money to you. A QR code is used for payments, not receipts.

4. Use Secure Apps Only: Download UPI and bank apps only from official app stores to avoid malicious apps.

5. Keep an Eye on Transactions: Check bank statements and UPI transaction history now and then for any suspicious transactions. Report any suspicious transactions promptly.

6. Activate Device Security Features: Implement biometric verification, strong passwords, and app locks to restrict unauthorised access.

7. Beware of Customer Care Calls: If you receive a call seeking credit card details, hang up and call your bank on their official helpline.

8. Do Not Use Public Wi-Fi for Payments: Public Wi-Fi can be susceptible to hackers' attempts that steal payment details.

Institutional Anti-Fraud Controls

RBI and payment system operators have implemented various safety features to prevent the risk of fraud as follows:

• Two-Factor Authentication: UPI payments involve a password and OTP for authentication.

• Limit on Transactions: There is a daily limit on transactions for minimising potential loss in case of fraud.

• Device Binding: UPI accounts are now device-bound, which makes it more difficult for unauthorised use.

• Fraud Reporting Mechanisms: RBI and banks have simplified the redressal of complaints for fraud victims. Users can report fraud transactions through the National Cybercrime Reporting Portal or their bank helpline.

The combination of UPI with credit cards has huge advantages but demands users to remain vigilant about scammers. Users can take advantage of UPI credit card payments without being victims of fraud by remaining alert, adopting the best security measures, and being watchful.