Role of Artificial Intelligence in Detecting and Preventing Financial Scams in the Banking Sector

The rapid expansion of digital banking and online payment platforms has transformed the banking sector by making financial transactions faster and more accessible. India has witnessed a sharp rise in technology-enabled financial scams alongside the growth of UPI, mobile wallets, and app-based banking. Reports indicate a significant increase in digital payment frauds, phishing attacks, and UPI-related scams in recent years, raising serious concerns over consumer safety and trust (The Economic Times, 2023)1. This growing incidence of cyber-enabled fraud has compelled banks to rely increasingly on Artificial Intelligence (AI) for fraud detection and prevention. However, despite technological advancement, customer confidence in digital banking systems remains fragile (Mint,2024)2.

This study examines the role of Artificial Intelligence in detecting and preventing financial scams in the banking sector, with a focus on customer perception and usage behaviour. The article covers major scams such as phishing and spoofing attacks, OTP and UPI frauds, fake banking applications, identity theft, and social engineering–based financial frauds that are frequently reported in Indian media (The Times of India, 2023)3. Primary data were collected from 50 online application users who regularly conduct financial transactions through scheduled interview and analysed through descriptive statistical methods.

The study concludes that AI-driven solutions must be complemented by robust regulatory frameworks, enhanced cybersecurity measures, and targeted financial literacy initiatives. Preventive measures such as advanced AI monitoring systems, multi-factor authentication, and continuous user awareness programs are suggested to strengthen customer confidence in digital banking systems.