{"id":24616,"date":"2026-03-01T20:56:13","date_gmt":"2026-03-01T15:26:13","guid":{"rendered":"http:\/\/www.sachdevajk.in\/?p=24616"},"modified":"2026-03-01T20:56:13","modified_gmt":"2026-03-01T15:26:13","slug":"credit-cards-and-digital-payments-in-india-risks-challenges-and-pathways-to-a-cashless-economy","status":"publish","type":"post","link":"http:\/\/www.sachdevajk.in\/?p=24616","title":{"rendered":"Credit Cards and Digital Payments in India: Risks, Challenges, and Pathways to a Cashless Economy."},"content":{"rendered":"
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Credit Cards and Digital Payments in India:\u00a0<\/span>Risks, Challenges<\/span>, and Pathways to a Cashless Economy<\/span>.<\/span><\/span>\u00a0<\/span><\/p>\n<\/div>\n

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Author:<\/span>\u00a0<\/span><\/span>Shreya Poojari<\/span>\u00a0<\/span><\/p>\n<\/div>\n

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RollNo – 0225040<\/span>\u00a0<\/span><\/p>\n<\/div>\n

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\u00a0<\/span><\/p>\n<\/div>\n

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Introduction<\/span>:<\/span><\/span>\u00a0<\/span><\/p>\n<\/div>\n

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The prevalence of digital payments in India has grown with a steady rise in credit card days, loans, and transactions\u2024 While it provides many benefits including convenience and financial inclusion, other problems have been reported, including fraud and phishing, data misuse, and low financial literacy\u2024 The above literature reviews reflect different aspects of this emerging financial ecosystem\u2024 Other studies try to develop statistical models and use Artificial Intelligence to prevent and detect credit card fraud\u2024 These studies mainly outline how the use of technology may strengthen the security of the banking and payment systems\u2024 Further studies observe behavioural indicators of credit score knowledge, borrowing patterns, or how a family’s financial literacy impacts financial outcomes\u2024 Other research has focused on demonetization and its role in promoting digital payment adoption, as well as the challenges faced by small merchants in accepting cashless payments\u2024 Data \u200cprivacy challenges in digital lending have also highlighted the need for better regulations around data use\u2024 In general, these studies support the view that increased security, awareness, building trust, and regulation are critical to \u200censuring that digital credit can provide growth and opportunity in a sustainable way\u2024<\/span><\/p>\n<\/div>\n

\u00a0 \u00a0 \u00a0 \u00a0 \u00a0\u00a0\u00a0\u00a0<\/span>Review of Literature:\u00a0<\/span><\/span>\u00a0<\/span><\/p>\n

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\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0<\/span>1<\/span>.\u00a0<\/span>\u00a0Predicting Credit Card Frauds in India<\/span><\/span>\u00a0<\/span><\/p>\n<\/div>\n

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\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0<\/span>Puri, L., Singh, R., & Bhuyan, R. (2025)<\/span>\u00a0<\/span>e<\/span>xpresses credit card fraud in India and builds a model to catch it early. Using data from 7,500 cardholders over\u00a0<\/span>nearly two<\/span>\u00a0years, it found that unusual spending patterns like buying far from home, making online orders, or spending much more than usual are strong warning signs. Fraud comes in two main forms: application fraud (fake details to get a card) and behavioural fraud (misusing real card info, such as stolen or counterfeit cards). The model was highly\u00a0<\/span>accurate<\/span>, correctly spotting fraud in about 94% of cases, with the \u201cratio to median purchase price\u201d being the most powerful predictor. The authors suggest banks should group customers by fraud risk, tighten controls, and run awareness campaigns to protect users. Overall, the study offers a clear framework to strengthen trust in India\u2019s digital payments.<\/span><\/span>\u00a0<\/span><\/p>\n

\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a02.<\/span>\u00a0<\/span>\u00a0E-Payment Challenges and Credit Card Use<\/span><\/span>\u00a0<\/span><\/p>\n

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\u00a0<\/span>\u00a0<\/span>\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0<\/span>\u00a0 \u00a0 \u00a0<\/span>Gupta, N., Sharma, H., & Lavania, D. (2011)<\/span><\/span>\u00a0expla<\/span>ins how electronic payments have grown beyond cash and cheques to include e\u2011cash, e\u2011cheques, mobile payments, sma<\/span>rt cards, and even biometrics. Credit cards remain<\/span><\/span>\u00a0the most common, especially online, making up mor<\/span><\/span>e than 80% of <\/span><\/span>transactions. In India, h<\/span><\/span>owever, many people still prefer cash because of poor infrastructure, limited internet access, and security fears. Fraud risks like phishing, card cloning, and counterfeiting further reduce trust. The authors suggest stronger encryption, authentication protocols such as SSL and SET, and closer cooperation between banks and government to improve awareness and security. Overall, the study shows that while credit cards drive e\u2011payment adoption, India must address issues of trust, accessibility, and safety before moving fully toward a cashless economy.<\/span>\u00a0<\/span><\/p>\n

\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0\u00a0\u00a0<\/span>3<\/span>.<\/span>\u00a0Phishing Attacks and Credit Card Security<\/span><\/strong><\/span>\u00a0<\/span><\/strong><\/p>\n

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\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 <\/span><\/span>Nirmala, M., Kumar, K. N., & Dhinesh Babu, L. D. (2010) i<\/span><\/span>n this study talk about how phishing attacks threaten online payments and credit card security. Phishing tricks users into giving away sensitive details like passwords and card numbers through fake links, spoofed websites, pop\u2011ups, or phone\u00a0<\/span>sc<\/span>ams<\/span>.\u00a0<\/span>The study highlights remedies such as user training, stronger authentication, third\u2011party certifications, and anti\u2011phishing tools like\u00a0<\/span>Sp<\/span>oofGuard<\/span>\u00a0o<\/span>r eBay Toolbar. Multi\u2011factor authentication and watermarking are also suggested to strengthen protection. Still, attackers keep evolving, making phishing a persistent risk for credit card users. The authors stress that awareness, secure authentication, and better detection tools are essential to safeguard consumer trust in digital payments.<\/span><\/span>\u00a0<\/span><\/p>\n

\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0<\/span>4.<\/span>\u00a0 AI in Credit Risk and Fraud Detection<\/span><\/span>\u00a0<\/span><\/p>\n

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\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0<\/span>Goyal, K., Garg, M., & Malik, S. (2025)\u00a0highlights how Indian banks are moving from old statistical models to advanced AI for credit risk and fraud detection. By using tools like predictive analytics and deep learning, banks can process\u00a0<\/span>huge amounts<\/span>\u00a0of data instantly spotting fraud as it happens and predicting loan repayment more accurately. A survey of 271 banking professionals showed that long\u2011term success depends not just on ease of use, but also on employees\u2019 attitudes, technical knowledge, and experience. The authors stress that banks must build trust in AI decisions and educate customers about fraud (like fake emails) to keep transactions safe. Overall, AI acts as a powerful shield, making credit card use more secure and loan approvals faster in India\u2019s growing digital economy.<\/span><\/span>\u00a0<\/span><\/p>\n<\/div>\n

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\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0<\/span>5.\u00a0<\/span>Credit Score Literacy and Borrowing Behaviour<\/span><\/span>\u00a0<\/span><\/p>\n<\/div>\n

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\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0<\/span>Altaf, Z., & Shah, F. (2025) in th<\/span>is study talks about a major problem happening in India like many people simply\u00a0<\/span>don’t<\/span>\u00a0understand how credit scores work, which leads to poor financial decisions. By analysing 425 borrowers, researchers found that this lack of “credit literacy” often causes people to misuse their credit cards, resulting in trapped cycles of high interest rates, late fees, and mounting debt. Beyond just a lack of knowledge, the study points out that psychological traits<\/span>\u00a0<\/span>like a desire for status through “materialism” or a lack of self-control<\/span>\u00a0create\u00a0<\/span>impulsive spending that further\u00a0<\/span>creates a problem\u00a0<\/span>for<\/span>\u00a0a person’s financial health.<\/span>\u00a0<\/span>On the flip side, those who actually understand the “rules of the game” tend to borrow much more wisely.<\/span>\u00a0By knowing how interest rates and repayment terms work, informed borrowers can negotiate better deals and\u00a0<\/span>maintain<\/span>\u00a0a clean credit history. The core message is that a credit score\u00a0<\/span>isn’t<\/span>\u00a0just a number; it is a tool for financial freedom. When individuals take the time to learn how it works, they are much less likely to fall into the trap of over<\/span>\u00a0<\/span>indebtedness and are better positioned to build a stable, stress-free financial future.<\/span>\u00a0<\/span><\/span><\/p>\n<\/div>\n

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\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a06. <\/span>Understanding the Influence of Family on Financial Health<\/span><\/span> \u00a0<\/span><\/p>\n<\/div>\n

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\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 Kaur, R., & Singh, M. (2025)<\/span>shows how family financial socialization\u2014parents\u00a0<\/span>teaching<\/span> kids about saving, spending, and money management shapes the financial well\u2011being of students in Punjab. Surveying 242 undergraduates, the researchers found that open discussions about money build stronger financial attitudes and confidence (self\u2011efficacy), which in turn improve overall financial satisfaction. The impact works partly through these traits: good attitudes and confidence act as bridges between family lessons and financial well\u2011being. The authors suggest that policymakers and banks should encourage families to go beyond simple advice and provide hands\u2011on financial learning, helping young adults transition into financially secure, independent lives.<\/span><\/span><\/p>\n<\/div>\n

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\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0<\/span>7<\/span>. Credit Risk Prediction in P2P Lending and Credit Cards<\/span><\/span>\u00a0<\/span><\/p>\n<\/div>\n

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\u00a0 \u00a0 \u00a0 \u00a0 \u00a0<\/span>Souadda<\/span>, L. I.,\u00a0<\/span>Halitim<\/span>, A. R.,\u00a0<\/span>Benilles<\/span>, B., Oliveira, J. M., & Ramos, P. (2025) studies\u00a0<\/span>how banks and peer\u2011to\u2011peer lenders are replacing traditional credit scores with advanced machine learning models like\u00a0<\/span>LightGBM<\/span>\u00a0and\u00a0<\/span>XGBoost<\/span>. By fine\u2011tuning these models with tools such as\u00a0<\/span>Optuna<\/span>\u00a0and\u00a0<\/span>Hyperopt<\/span>, they achieve faster results up to 75 times quicker while reaching over 93% accuracy. Key risk signals include debt\u2011to\u2011income ratios and employment details. The authors emphasize that these AI\u2011driven systems not only improve accuracy and efficiency but also make lending fairer and more transparent, helping financial institutions approve loans safely and protect credit card users.<\/span><\/span>\u00a0<\/span><\/p>\n<\/div>\n

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\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0<\/span>\u00a0<\/span>8<\/span>.<\/span>\u00a0Awareness of Small Retailers in Cashless Transactions<\/span><\/span>\u00a0<\/span><\/p>\n<\/div>\n

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\u00a0 \u00a0 \u00a0 \u00a0\u00a0<\/span><\/span> \u00a0<\/span>C<\/span>h<\/span>attopadhyay, S., Gulati, P., & Bose, I. (2018)\u00a0<\/span>looks at how small shopkeepers in Bareilly, India, handled the push toward digital payments after demonetization. By surveying 117 retailers, researchers found a big gap between what shopkeepers knew and what they\u00a0<\/span>used<\/span>.\u00a0<\/span>While most were aware of debit and credit cards, very few actually accepted them.<\/span>\u00a0The biggest roadblocks\u00a0<\/span>weren’t<\/span>\u00a0just a lack of gadgets; they were a lack of trust and “fear of the unknown.” Many retailers worried that technical glitches would lead to lost money or that digital systems were too complicated compared to the reliability of cash. Even though the government pushed for a “cashless India,” tools like UPI and banking apps had surprisingly low recognition at the time of the study. For credit cards specifically, the struggle was even greater because many shops\u00a0<\/span>didn’t<\/span>\u00a0have the swipe machines (POS terminals) needed to process them. The study concludes that simply telling people about digital payments\u00a0<\/span>isn’t<\/span>\u00a0enough to change their habits. To get small businesses to ditch cash, there needs to be better technology in place, stronger security to prevent fraud, and more hands-on education to build confidence. Until these “technical barriers” and fears are addressed, many small retailers will continue to see cash as the safest and easiest way to do business.\u00a0<\/span><\/span><\/p>\n<\/div>\n

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\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0<\/strong><\/span>9<\/span>.\u00a0<\/span>\u00a0<\/span>Demonetization<\/span>\u00a0and Credit Card Usage in India<\/span><\/strong><\/span>\u00a0<\/span><\/strong><\/p>\n<\/div>\n

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\u00a0\u00a0<\/span>\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0<\/span>I<\/span>n 2016 demonetization on digitization in India took place, with a particular focus on credit card usage. On November 8, 2016, the Indian government withdrew INR 500 and INR 1000 notes, removing 86% of cash from circulation. While this caused short-term disruption and liquidity issues, it accelerated the adoption of digital payment systems such as internet banking, mobile wallets, debit\/credit cards, RTGS, and NEFT. Using RBI data from March 2015 to July 2018, the study compares pre- and post-<\/span>demonetization<\/span>\u00a0trends. Results show a significant rise in digital transactions, especially in credit card usage, which saw an increase of over 11% in transaction volume and more than 109% in transaction value. Debit card usage, however, declined due to withdrawal limits at ATMs. Credit cards became more prominent as consumers shifted to cashless modes for convenience, security, and accessibility. Overall,\u00a0<\/span>demonetization<\/span>\u00a0acted as a catalyst for\u00a0<\/span>digitization<\/span>, positioning credit cards as a key driver of India\u2019s transition toward a cashless economy. <\/span><\/span>Chavali, K., Prasad, C., & Srinivasa Rao, K. S. (2019).<\/span> \u00a0<\/span><\/p>\n<\/div>\n

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\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 <\/span>\u00a0<\/span>10<\/span>.\u00a0<\/span>Data Privacy in Digital Credit<\/span><\/strong><\/span>\u00a0<\/span><\/strong><\/p>\n<\/div>\n

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\u00a0\u00a0<\/span>\u00a0 \u00a0 \u00a0 \u00a0 \u00a0<\/span>Koul, S., Verma, R., &\u00a0<\/span>A<\/span>jaygopal<\/span>,<\/span>\u00a0K. V. (2025)\u00a0<\/span>study explores the high-stakes world of digital lending in India, where the market is booming toward a trillion-dollar future. To decide who gets a credit card or a loan, modern “fintech” companies are now looking far beyond your bank balance; they track your mobile\u00a0<\/span>a<\/span>pp<\/span>\u00a0<\/span>usage, shopping habits, and even social media activity. While this helps more people get credit, it creates a massive privacy risk. By surveying over 1,500 people, including users and regulators, the researchers found that most people are worried about how their personal data is being shared or stolen. Even though India has laws like the IT Act to protect us, the study points out that these rules\u00a0<\/span>a<\/span>ren’t<\/span>\u00a0<\/span>always followed consistently by every company.<\/span>\u00a0<\/span>Ultimately, making sure your\u00a0<\/span>p<\/span>rivate information<\/span>\u00a0<\/span>stays private is the only way to keep the digital credit system from collapsing under the weight of public distrust.\u00a0<\/span><\/span><\/p>\n

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\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0\u00a0Conclusion:<\/span><\/span>\u00a0<\/span><\/strong><\/p>\n

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\u00a0 \u00a0 \u00a0 \u00a0 \u00a0<\/span>These 10 studies suggest that<\/span>\u00a0while<\/span>\u00a0<\/span>credit cards and digital payments are driving India toward a cashless economy, the transition is a complex balance of innovation and risk. Advanced technologies like AI and machine learning have significantly improved fraud detection and credit scoring accuracy. However, significant hurdles\u00a0<\/span>remain<\/span>, including phishing attacks, data privacy concerns among fintech users, and a “fear of the unknown” that keeps small retailers reliant on cash.\u00a0<\/span>Ultimately, the<\/span>\u00a0research suggests that technical tools alone are not enough. To build\u00a0<\/span>a truly secure<\/span>\u00a0and inclusive ecosystem, India must prioritize financial literacy and family-based education. By combining stricter security policies with hands-on consumer awareness, banks can bridge the gap between digital convenience and user trust, ensuring long-term financial stability for both individuals and the nation.<\/span><\/span>\u00a0<\/span><\/p>\n

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\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0<\/span>References:<\/span>\u00a0<\/span><\/p>\n<\/div>\n

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