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What if the next time you send money to a customer or partner, it silently goes into the wrong hands and you don’t realize your mistake until it’s too late?
In 10 months (April 2024-January 2025), Indian enterprises lost more than INR 4,245 crore due to digital payment fraud; this is just the recorded figure. With the UPI boom, real-time payouts, and mobile-first banking, disbursements have seen an all-time high surge, and so have financial frauds. Every second, somewhere in the system, a fraudster is testing a loophole, exploiting a reward scheme, or triggering a fake payout. As fraudsters scale operations with bots, fake IDs, and stolen credentials, traditional controls just can’t keep up.
This leads to revenue loss, loss of customer trust, regulatory issues, and damage to the platform’s reputation. Businesses that still rely on basic checks are flying blind in a world that demands intelligent risk controls. The question isn’t if you’ll be targeted. It’s when and whether your system will recognise and stop it before money leaves your account.
Common Payment Disbursal Threats You Must Know About
Let’s explore the major payment-related frauds and error types that threaten your disbursal operations:
- Identity Masking using Multiple UPI VPAs
This is the most common type of fraud that happens today with Indian businesses since more than 500 million active users in India rely on UPI for daily payments. Scammers can exploit UPI’s flexibility by creating multiple UPI handles linked to the same mobile number or bank accounts. This makes it harder to trace identity or detect misuse across accounts.
For example, the same user (here, Ashish) can create VPAs like: 9348101196@axisbank, 9348101196@sbi, nishant4218@sbi, nishttyagi126@utkarshbank, etc. This trick is frequently used in referral abuse, gaming promo abuse, or loyalty reward frauds, where the same user claims multiple benefits by appearing as different individuals.
- Penny Drop Abuse for Bank Validation Fraud
Penny drops (Rs 1 verification transfers) are commonly used by merchants to validate bank account ownership. Fraudsters can easily exploit this by creating multiple virtual bank accounts and running automated scripts to trigger lakhs of Rs. 1 transactions. Over time, these add up to large, unintended payouts (more than lakhs) from merchants who are unaware of the abuse.
- Unauthorised access/Internal user fraud
A fraud that is mostly executed by ex-employees and anyone else with access to your company’s system, or if you have outsourced your technical development to a third party. The damage is usually noticed only when reconciliation fails. Traditional controls lack the behavioural detection needed to catch these early-stage threats.
- Reward Scheme Abuse
Fraudsters exploit loyalty and referral programs by posing as multiple users to claim excessive rewards. This often involves creating fake UPI VPAs like user@apl, user@rapl, and user@yapl, all linked to the same individual. They may also use virtual bank accounts or reuse the same bank account with different IFSC codes to bypass basic checks. This drains marketing budgets and distorts campaign performance, while manual systems struggle to detect cross-account abuse.
- Systemic Internal Failures and Double Payouts
Software glitches, misconfigurations, or simply human error can result in duplicate transfers or unintended payouts. Such mistakes disrupt the cash flow and require time-consuming reconciliations, eating into profitability.
- Disbursement errors
Errors like mistyped UPI IDs or incorrect bank accounts can result in sending funds to the wrong beneficiary. Reversals can take days or be impossible, adding operational burden and reputational risk.
- Identity theft
This fraud takes place when fraudsters create fake vendor or employee profiles with forged documents and set up bank accounts to illegally withdraw money. These accounts often slip through KYC processes and result in unauthorised disbursements.
- Zero-Padding in Bank Account Numbers
To bypass duplicate checks, fraudsters add unnecessary leading zeroes to bank account numbers. For example, the account 31279976522 may be entered as 0031279976522 or even 000031279976522, tricking basic systems into treating them as unique. This simple manipulation often helps them bypass referral systems or create fake vendor profiles.
- Same Bank Account with Different IFSC Codes:
In IMPS transactions, only the first four digits of an IFSC code are used for routing. Fraudsters can easily take advantage of this by pairing the same bank account number with multiple IFSC codes from different branches to appear as distinct beneficiaries. For instance:
SBIN0001211 and SBIN0002122 are used with the same bank account number.
Stop Fraud Before It Happens with Payout Protect by Cashfree Payments
Cashfree’s Payout Protect (also known as RiskShield for disbursals) embeds proactive fraud controls across every payout. Its capabilities map directly to each threat:
- Detecting Multiple VPA from a Single User
RiskShield maps every UPI VPA to the actual bank-verified account holder name. So even if a fraudster uses several VPA across third-party UPI apps, the system can trace them back to a single user and flag the behaviour in real time. - Flagging Virtual Bank Account Loops
The ML model within RiskShield monitors disbursal patterns and recognises suspicious clusters of payouts going to multiple virtual accounts with similar metadata like device ID, IP, or timing, flagging them as reward abuse attempts. - De-duplicating Accounts with IFSC Variations
RiskShield treats the combination of the first four digits of the IFSC and the bank account number as a unique identity, ensuring that one account isn’t passed off as multiple beneficiaries by using different IFSC branches. - Detecting Account Takeover: When a compromised account triggers unusual payout volume, frequency, or destination behaviour, Payout Protect’s ML-based anomaly detection flags or blocks the transaction in real time. A “Risky Transfers” dashboard presents these instances for swift review.
- Preventing Rewards Scheme Abuse: Businesses can configure smart rules, such as “no more than ₹50,000 per UPI handle per month,” so attempts to exploit loyalty payouts are automatically blocked or flagged.
- Avoiding Systemic Failures & Double Payouts: Real-time monitoring detects duplicate or surge anomalies based on time-based thresholds. Smart limits also cut cumulative risks, preventing double disbursals caused by internal errors.
- Mitigating Disbursement Errors: Beneficiary verification via API confirms account validity before funds leave. Transfers that trigger anomaly logic—such as new or mismatched details—are stopped and added to “Risky Transfers” for manual intervention.
- Combating Identity Theft: Cashfree incorporates a pre-built blacklist from RBI, SEBI, IRDAI, and law enforcement databases to automatically block payouts to high-risk identities. You can also add internal blacklists based on emerging threats.
A Step-by-Step Guide to Using Cashfree Payout Protect
To get started, log in to your Cashfree Payouts dashboard and enable Payout Protect—no additional integration is needed. Plus, you get a free trial for 30 days.
- Turn on Machine learning based Risky Transfer Detection to monitor payout behaviour in real time.
- Define Smart Limits: Set thresholds for maximum per transaction, daily, monthly, and per account/UPI handle, as well as specifying restricted payout times. If a payout exceeds any of the set limits, it’s flagged as “Pending Review” so you can manually approve/reject it.
- Next, enable Cashfree Blacklist for automatic blocking of dangerous entities. You can also add any internal red-flagged accounts. This is linked with the Department of Telecom’s Fraud Risk Identifier, a national repository that flags high-risk mobile numbers based on inputs from cybercrime agencies, banks, and financial institutions.
- Use daily reports and the “Risky Transfers” screen to review flagged transactions and take appropriate action—approve or block.
- You are all set to protect your business against payment payout-related fraud. Refine rules monthly based on data-driven insights and fraud trends.
Summing it Up
Fraud doesn’t wait, and neither should your protection. As digital disbursals scale, so do the risks. With Cashfree’s Payout Protect, you get real-time controls, intelligent fraud detection, and peace of mind built right into your workflow.
Ready to secure every rupee you send with Payout Protect?