How UIDAI is using AI to tackle payment frauds

Subject: Science and technology

Section: Awareness in IT

Context:

As more frauds related to the Aadhaar enabled Payment System (AePS) come to the fore, the Unique Identification Authority of India (UIDAI), has turned to artificial intelligence (AI) based systems in response – this includes developing technologies around fingerprinting and facial recognition.

About AePS:

AePS is a payment service that allows a bank customer to use Aadhaar to access her bank account and perform basic transactions like balance inquiry and cash with-drawals.
UIDAI is the statutory authority that issues Aadhaar and administers the unique biometric ID system.
Step taken to prevent AePS frauds:
- To prevent AePS frauds by the use of manipulated fingerprints during Aadhaar authentication, the UIDAI has rolled out an in-house Al/ machine learning technology-based
- “Finger Minutiae Record-Finger Image Record” (FMR-FIR) modality that can check the “liveness” of a fingerprint to detect clones during the authentication process.
- In May, Airtel Payments Bank collaborated with National Payments Corporation of India (NPCI) to launch a facial recognition-based authentication measure for AePS transactions. NPCI operates retail payments and settlement systems such as UPI and BHIM.

How does the Aadhaar fingerprint technology work?

The technology, which has been developed in-house by UIDAI uses a combination of finger minutiae and finger image to check the liveness of the fingerprint captured.
In effect, the Al-based technology is able to identify whether the fingerprint is from a real, or
‘live’ finger, or from a fake/ cloned one.

How serious is the problem of payment fraud?

The volume of financial crimes reported in the country went up from 2.62 lakh in 2020-21 to 6.94 lakh in 2022.
The payment-related frauds in India rose from a little more than 7 lakh in 2020-21 to close to 20 lakh in 2022-23.
Due to the limited awareness of cyber fraud, a significant number of people do not report instances of fraud to the authorities.
According to the Indian Cyber Crime Coordination Centre (I4C), of the 694,424 complaints related to financial fraud in the year 2022, FIRs were registered in only 2.6% of cases.

How far can technology help to address this problem?

Technological measures can only go so far, especially since a sizable number of AePS frauds over the years have had a similar modus operandi – involving the participation of a key actor in the payments supply chain, the business correspondent.
- A business correspondent (BC) is an informal bank agent equipped with a biometric point of sale (PoS) machine, which works like a micro ATM.

About National Payments Corporation of India (NPCI):

It is an umbrella organization for operating retail payments and settlement systems in India.
It is an initiative of the Reserve Bank of India (RBI) and the Indian Banks’ Association (IBA) under the provisions of the Payment and Settlement Systems Act, 2007, to create a robust Payment & Settlement Infrastructure in India.
It has been incorporated as a “Not for Profit” Company under the provisions of Section 25 of the Companies Act 1956 (now Section 8 of the Companies Act 2013).
The Company is focused on bringing innovations in the retail payment systems through the use of technology for achieving greater efficiency in operations and widening the reach of payment.
NPCI is promoted by ten major banks, including the State Bank of India, Punjab National Bank, Citibank, Bank of Baroda, and HSBC.
The regulatory board of the NPCI, headquartered in Mumbai, includes nominees from the RBI along with nominees from ten core promoter banks.
Payment systems that the NPCI can operate include:
- National Financial Switch (NFS),
- Immediate Payment System (IMPS),
- Aadhaar-enabled Payments System (AEPS) and
- National Automated Clearing House (NACH).

Services Offered by NPCI:

Bharat Bill Payment Interface (BBPI): It was developed by the NPCI to help the retail payments sector. With the introduction of the BBPI, a single platform has been made for aggregators and 0billpayers.
Immediate Payment Service (IMPS): It gives you the option to transfer funds immediately. The facility is available at any given time. The beneficiary details must be added to transfer funds via IMPS. You can add the IFSC code and the account number to transfer funds via IMPS.
RuPay: NPCI introduced RuPay so that average citizens can make financial decisions. RuPay is an affordable card and can be issued as credit cards, debit cards, and prepaid cards. More than 300 million RuPay cards are in India.
USSD Services: Unstructured Supplementary Service Date (USSD) was introduced by the NPCI to allow individuals to make banking solutions without the need for the internet or smartphones.
BHIM: BHIM uses UPI to complete payment transfers. You can make payments via BHIM by entering the Virtual Payment Address (VPA) or the registered mobile number. No smartphone is required to transfer funds via BHIM.
UPI: United Payments Interface (UPI) allows you to transfer funds from your smartphone. However, you will need to link your bank account to complete payments via UPI. Money is transferred directly from one bank to another.

About Unique Identification Authority of India (UIDAI):

It is a statutory authority established under the provisions of the Aadhaar Act 2016 by the Govt. of India under the Ministry of Electronics & Information Technology.
Vision: To empower residents of India with a unique identity and a digital platform to authenticate anytime, anywhere.
It is created to issue Unique Identification Numbers (UID), which is also known as ‘Aadhaar number’ to all the residents of India.
Under the Aadhaar Act 2016, UIDAI is responsible for Aadhaar enrolment and authentication, including operation and management of all stages of the Aadhaar life cycle and the system for issuing Aadhaar numbers to individuals.
Composition: UIDAI consists of a Chairperson, two part-time Members and the Chief Executive Officer (CEO), who is also the Member-Secretary of the Authority.