Being in a digital age, fraud related to online transactions has become crucial, posing significant challenges for financial institutions and regulations. Hence, there is a critical need to surpass the hurdles like payment fraud as more of them keep on sprouting related to the Aadhaar-enabled Payment System (AePS) as well. The Unique Identification Authority of India (UIDAI) has taken a proactive method to tackle these frauds by opting for Artificial Intelligence integrated systems in a bid to reduce fraud cases, which predominantly includes developing technologies like fingerprint and facial recognition.

Bhagwat Karad, the Minister of State for Finance, stated in Parliament that, in order to prevent AePS frauds, the use of spoofed fingerprints during Aadhaar authentication, the UIDAI has rolled out an in-house Artificial Intelligence and Machine Learning technology-based Finger Minutiae Record – Finger Image Record (FMR-FIR) modality which is able to check the liveness of a fingerprint to detect the use of cloned fingerprint during the authentication process and facial recognition in the transaction authentication.

Let us have a peek into how these AI measures help curb payment frauds, ensuring a safe money transaction. 

AI-based fingerprint Minutiae record- Finger image record (FMR-FIR) modality

In order to prevent the use of cloned fingerprints during the Aadhaar authentication process, UIDAI has launched its in-house Artificial Intelligence and Machine Learning technology-based FMR-FOR modality. Using this well-defined system can help distinguish real and live fingerprints from cloned ones. This will enable an added layer of security for the AePS transactions. By checking the liveliness of a fingerprint in authentication processes, this AI-based solution has significantly minimised the instances of fraudsters manipulating fingerprint data in illegal acts like accessing bank accounts unlawfully.

How facial recognition helps in transaction authentication?

In May this year, Airtel Payments Bank collaborated with the National Payment Corporation (NPCI) and joined hands with UIDAI to roll out a facial recognition-based authentication method for all AePS transactions. Using this emerging technology like facial recognition, developed in-house by UIDAI, will empower the security of digital transactions. This will help verify the identity of a user by recognising the facial features and ensuring that only the original person can proceed with the financial transactions by effectively abolishing the attempt of fraudsters to exploit and misuse the system.

The rise in trends of payment fraud

As per the reports revealed by Home Ministry and Standing Committee on Finance, there is a considerable increase in the scale of payment fraud in India. For instance, the Financial Year of 2020-21 encountered around 2.62 lakhs of reported cases of various financial crimes, while 2022 witnessed a staggering 6.94 lakhs of fraud cases.

Among them, transaction-based frauds dramatically increased, reaching almost 20 million cases in the financial year of 2023. The statistics exhibit the tenacious need for a robust solution to end this, like an AI-based system that can safeguard digital transactions and protect users from all potential cybercrimes.

The strenuous efforts of UIDAI to fight AePS fraud

UIDAI, with its immense and sensible use of AI-based solutions, continue to curb fraudsters. According to reports, the agency is actively investigating the complaints filed on AePS transactions, with around 2000 complaints filed between November 2021 and March 2023. UIDAI targets to wipe out payment frauds and reinforce the security of digital payment systems by partnering with banks, government agencies and stakeholders across the country in order to retrieve the trust of millions of citizens in our country.

• https://www.analyticsvidhya.com/blog/2023/08/how-india-is-using-cutting-edge-ai-to-tackle-payment-frauds/#:~:text=UIDAI's%20Ongoing%20Efforts%20to%20Combat,November%202021%20and%20March%202023.
• https://indianexpress.com/article/explained/explained-sci-tech/how-uidai-is-using-ai-to-tackle-payment-frauds-8871408/