Online pay aggregators focus on anti-fraud tech to up revenues

Time of India

7 days ago

Large online merchant-focused payment aggregators (PAs) are building software platforms for fraud detection and deploying them in banks and other
fintech companies
. It comes at a time when revenue generation from core payments business has become tougher owing to severe competition and pricing regulations by the government.
Payment companies are building software-as-a-service play for their enterprise clients and using it for recurring revenue generation.
Major PAs such as
PayU
,
Razorpay
and
PhonePe
have built fraud detection tools to protect their customers and prevent frauds in their systems. Now they are pitching these tools to banks, offering them a higher degree of safety for their customers as well as better transaction success rates.
A senior industry executive told ET that globally firms such as Visa and Mastercard offer advanced fraud detection services for card payments and that India payment companies are moving in this direction along with mobile-based payments.
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'The regulator has licensed some 50 online Pas. Now all of them are chasing the large ecommerce merchants to grab a significant chunk of the payments value. But revenue generation has been a challenge, hence they are focusing on building value-added services,' said the executive, who did not wish to be identified.
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Besides, given that almost every community bank, cooperative bank and mid-sized private sector lender now offers digital payment solutions such as debit cards and Unified Payments Interface (UPI) to their customers, technology service providers for advanced fraud detection.
'There are 668 banks live on UPI, as per the NPCI's latest count. Smaller banks cannot build technology on their own and we are already doing this for our own payment processing, hence we can easily help them,' the founder of a digital payments startup said on condition of anonymity.
Through the technology stack, payment companies can ensure transactions are being undertaken by the actual customer, un-natural payment behaviour is stopped and genuine beneficiaries actually get the payments. They can also offer merchant verification services, which ensures that genuine merchants process transactions.
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'While we already work with large banks to address their payment fraud needs, there are many mid and small-sized financial institutions that need strong technology solutions to fight payment fraud. We are also targeting this segment and the opportunity is significant,' said Anirban Mukherjee, chief executive officer, PayU.
PayU offers fraud detection services to banks through Wibmo, which it acquired in 2019.
Walmart-backed PhonePe, which is a leader in UPI-based payments, is also doubling down on merchant payments. Fraud detection is also a major focus for the Bengaluru-based company now. It is targeting large enterprises as potential customers.
PhonePe's platform offers real-time detection and also allows banks to build their own rule engines which can detect abnormal patterns around digital payments.
PhonePe did not respond to ET's queries.
Razorpay, another large payments processor, is also developing its own fraud detection tool and is in the process of pitching to banks. The payments major is working with two of India's top six card-issuing banks, along with several mid-sized banks and fintechs.
Responding to ET's queries Arif Khan, Chief Innovation Officer, Razorpay said the company has built a white-labelled solution for banks.
'It is an authentication engine that enhances transaction success rates while ensuring robust security—helping businesses prevent fraud and offer a secured payment experience,' he added.
India's digital payments ecosystem has grown exponentially over the past few years — in April alone, around 600 million card transactions and around 11 billion UPI-based transactions were reported — but so have the cases of fraud. This has necessitated software services which can help banks, fintechs and the entire ecosystem to stay ahead of attacks from cybercriminals.
While these payment firms are securing banks and enterprises from payment frauds, there are other fintechs which are building fraud detection for the larger ecosystem. Players such as Bureau, Datasutram and Clari5, which recently got acquired by Perfios, also offer multiple fraud detection tools for digital lenders, wealth management platforms and banks to help in customer onboarding and know-your-customer verification.