January 8, 2025 · 12 mins read
Santosh Kumar
With the advent of digital payment schemes, payment mode has evolved and in India, one of the most frequently and widely employed systems is Unified Payments Interface (UPI). UPI has emerged as very popular because of its simplicity, efficiency and availability since its launch by the National Payments Corporation of India (NPCI).
However, as with any digital payment system, security and safety issues are inevitably raised. In this paper we try to find out if UPI is secure for online transactions, by defining its security features and risks, and by considering how all users can be protected to assure their privacy and ensure a secure transaction.
UPI is an interbank real-time payment system developed by NPCI that allows the user, via a mobile application, to send money instantaneously without delay from one bank to another. UPI connects a user's bank account to a unique reference which resolves into a Virtual Payment Address (VPA) e.g., an email address or a phone number (then). This platform provides natural immediate transactions without the requirement to input and enter sensitive bank information every time.
It is able to identify the recipient, state the amount, and approve the transaction by means of a one-time unique, people-customized UPI PIN. The transaction is carried out live, and both sender and receiver are communicated with.
The respect for security makes one of the factors explaining the nationwide adoption of UPI its high degree of security. The below are the feature beirfly explained
UPI transactions are secured by using two-factor authentication (2FA) and 2FA requires multiple (two) authentication factors for user identity verification. One of the factors is usually something that the user is familiar with (i.e., the UPI PIN), and the other is something that the user possesses, typically the mobile device associated with the account. The PIN is not saved on the device, which offers further protection.
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UPI PIN is an essential security step in this stage. In this system, a 4-6 digit PIN has to be manually keyed in by the user at the start of using UPI on the user's bank app. To authorize all transactions, the UPI PIN is mandatory and hence, an attempt will be made that unauthorized access to your account be not possible. Although it is possible to unlock your phone as a "remote person" would, no purchase is by any means made without the related PIN.
For each UPI transaction, users are alerted by an SMS or email. For example, such alerts include information on the transaction, i.e., the transaction amount, beneficiary, and transaction time. If, suspicious activity is detected in your account it is wise to inform your bank as quickly as possible to best minimise the opportunity for financial loss.
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All UPI transactions are protected by strong cryptographic schemes to ensure unauthorized data access is prevented. Furthermore, UPI adopts secure communication channels, so your confidential information, such as bank account information or UPI PIN, is not transmitted on the Internet in an open format.
Tokenisation is the substitution of sensitive data (such as credit or debit card numbers) by a unique identifier (the token). It additionally ensures that your actual payment information is never communicated to any vendors or third parties, thus providing a more secure online billing environment.
A biometric authentication, such as using a fingerprint or face recognition, is also available in a number of UPI apps (for security reasons). This added control can guarantee that payment verifications can only be executed by the authenticated user, obviating the risk of fraudulent attacks at the edge.
Even with robust security in place, there remain some inherent risks associated with the use of UPI in on the web payment. Let's look at these possible risks and how they can be mitigated by the user.
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Phishing is one of the most prevalent problems of the digital payment world. Criminals have also been observed to use bank or other payment service impersonation by capturing some form of personal information via forged web page, or SMS, such as UPI PIN. Such attacks could tempt users to share their confidential information in such a manner as to be subsequently used to the perpetrator's advantage (i.e.
Precaution: Above all, do not check that you are connecting to the live website, or the live app. Do not click on unknown links that are received over SMS, email, or social media. Do not share any information on your personal details, such as your UPI pin, with anyone over the phone under any condition.
There are a variety of UPI applications offered in the market, and not every single one of them is valid. There are a few of such fraudulent applications that seem like legitimate UPI applications but have been developed for the purpose of stealing user information and money.
Precaution: Never download UPI application from any other source but download UPI application from trustworthy sources such as Google Play Store or Apple App Store only. In order to make the right choice of downloading the app, please give a consideration to the feedback from the users and the score of the app on stars rating.
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SIM swap fraud happens when criminals gain your mobile phone number by exploiting your mobile service operator. With access to your SIM card, they can also nullify your UPI PIN and drain your account.
Precaution: Protect your SIM card with a PIN or password. If the suspicious activity is seen on the phone, or you think your number is changed, then it should be reported to the mobile service provider.
If a mobile phone is lost or stolen and does not have sufficient security, it can function as an early entry point for unauthorized karaoke or electronic commerce. Although your UPI PIN safeguards the account, a vulnerability on the device side may still result in a compromised security.
Precaution: Do not leave your mobile phone with fingerprint, PIN or pattern lock unsecured. Moreover, remote wipe feature is also available for the purpose of precaution in case that the mobile phone is stolen. UPI applications are also equipped with the function of locking or revealing lost or stolen devices.
Man-in-the-middle (MITM) attacks are those in which an attacker intercept the communication channel between two subjects of a transaction. Clearly, because UPI is encrypted, when connecting through a public WiFi there is a risk if the connection is not properly secure.
Precaution: Do not make financial transactions while in public or open WiFi. It is recommended to use a secure and private internet connection when doing the UPI transaction.
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Finally, the security of UPI remains one of the best and fastest methods for online payment. Here are some of its advantages:
UPI allows for instant transfers between accounts, making it one of the fastest modes of payment in India. There is no need to memorise bank account numbers or IFSC codes; the process is easy and fast.
Most UPI transactions are free of charge. In contrast to the other digital payment techniques with transfer fee, in UPI, no transfer fee is charged.
UPI is well established in India with millions of merchants behind it. Whether in supermarkets or online, UPI has already become a mainstream payment mode with UPI as an easy payment gateway to pay anywhere in the world.
UPI has been instrumental in financial inclusion by providing means for transactions even those who do not have access to a traditional bank branch. Given that they have cell phone and an access to the Internet, shopping over the Internet is obtainable everywhere.
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Although the UPI has many more strength in terms of safety measures, still steps should be taken up by the user so that the transactions are secure. Here are some best practices:
Keep Your UPI PIN Confidential: Never give your UPI PIN to anyone, including family member. Just keep it secret, and do not put it on paper anywhere.
Enable Two-Factor Authentication (2FA): Use two-factor authentication whenever possible for added security.
Use Trusted UPI Apps: Never use unverified, obscure UPI apps such as Google Pay, PhonePe, Paytm, or BHIM to do transactions.
Monitor Your Transactions: Regularly check your bank account for any unauthorised transactions. Early detection can help minimise potential losses.
Secure it with a strong password/PIN/biometric authentication" each of the sensoriy modalities on the smart phone.
Be Cautious of Phishing Scams: Do not verify the correctness of any request for your UPI PIN or personal information.
Avoid Using Public Wi-Fi: Do not perform financial transactions on unsecured public Wi-Fi networks as the networks may not be encrypted.
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UPI continues to evolve. The most recent progress is a step towards better security and more and more powerful function. Among the included features, the evolution of UPI 2.0 and UPI Autopay is creating the basis for a more seamless, secure payment process. These improvements will allow the expansion of UPI and further the UPI capability for high volume transactions.
In addition, introducing to the field the collaboration with international infrastructure for payment, and implementing fraud detection tool at the NPCI level provides novel solutions for ensuring the continuous innovation of the UPI capability to avoid potential danger. This will allow for safer digital payments across India. With the ongoing improvements and the emerging technologies that are being delivered, UPI's credibility will continue to increase as a secure and most widely used payment system of the world. One of the various implications of the UPI is its impact on the financial inclusion phenomenon in India, and is subject of criticism. UPI made digital money available in even the scarcest parts and places where a traditional banking infrastructure is lacking.
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In conclusion, UPI can be considered the safest and the most efficient means of online payment in India. With the presence of two-factor authentication, encryption, and real-time transaction alerts, the UPI will give a complete safe frame for money remittance and payment transactions. Nevertheless, like any digital payment system, users are susceptible to the aforementioned threats, such as phishing, malicious apps and device theft, among others.
Following the aforementioned safety recommendations, there is much room for reducing exposure risk so that the user may utilize the advantages of speed, privacy, and personalization of an online transaction, that is, person-friendly online transaction. Because UPI is continuously evolving with the latest security leveraging it will have demonstrably shaping the digital payments of the future.
Is it safe to save my UPI PIN on my phone?
Do not record your UPI PIN or other personal information in the mobile phone. Even though some apps might promise to remember the PIN for you, it is always safer to enter it manually during each transaction. To enhance security, biometric authorisation, device locks, or password managers can safely store information.
2. Is it possible to use UPI on multiple devices simultaneously?
No, UPI is usually realized on a single mobile phone. If you try to use the same UPI ID or linked bank account on several devices at the same time, the system may warn you, alleging security issues. The best option is to run UPI on a single machine to prevent impersonation/fraud.
3. How can I report a fraudulent UPI transaction?
As soon as you spot a fraudulent transaction, report immediately to it as such to your bank or to customer care of the (UPI) application. Almost all apps have a separate number for a fraud hotline and the ability to temporarily shut off or lock the account.41. Where applicable you should also file a complaint with the National Cyber Crime Reporting Portal or the Consumer Court.
4. Can UPI be hacked through public Wi-Fi?
Internet access over public Wi-Fi for conducting UPI payment is dangerous as public Wi-Fi is less secured and the chances of UPI transaction being hacked is higher. Never engage in the financial transaction of any description using public Wi-Fi. Use a safe private internet connection. To name a few, mobile data or a proven VPN (Virtual Private Network).
5. Is UPI providing a refund when the payment fails or is incorrect?
It is true that UPI transactions are, for the most part, recoverable if a transaction fails or is processed incorrectly. When a UPI application is unsuccessful, it automatically transfers the amount of the uploaded money back to the applicant’s account. On the other hand, if there are discrepancies or errors that need to be intervened you will need to reach out to your bank or UPI application customer support for further support.
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