India's digital payments system is one of the fastest growing in the world. It handles billions of transactions every month and is helping the country move toward a less-cash economy.
Along with this rapid expansion comes an equally urgent need: to protect the personal information of millions of people who use UPI apps, wallets, cards and other payments instruments. The Digital Personal Data Protection (DPDP) Act 2023 is a big step in that direction. The digital payments industry is at a very important point as rules under the Act are about to be announced by 28th September 2025.
Finding a balance between innovation and consent
The DPDP Act is based on the idea of getting informed user consent. This gives payment providers both opportunities and problems. Stronger protections can build trust among consumers, which can make them more willing to use digital channels. On the other hand, there are big concerns about how things will work. Will you need permission for every transaction? What will happen to recurring or subscription payments? Could "consent fatigue" make it take longer for people to adopt? The answers to these questions will show whether the Act boosts user trust without affecting payment processes.
Banks and financial institutions that want to stay ahead of the game will need to invest in intuitive consent structures that are simple, clear and built into user flows. If done right, this may turn permission from a checkbox on a regulatory form into something that sets the business apart.
Changing how BFSI handles data
The Act's rules about limiting the purpose of data and retaining it will force payment businesses to change how they have functioned for many years. Transaction data, consumer profiles and behavioral insights have been the key to new ideas and reducing fraud. Under DPDP, companies must be transparent about why they gather data, how long they keep it and what happens if consumers change their minds.
This change will not only require strong governance structures, but it will also stimulate the use of technologies that protect privacy, such as anonymisation and tokenisation, as well as secure AI-based fraud models that use as little personal data as possible. Larger companies may be able to handle this change, but smaller fintechs will need help from regulators and maybe even staged compliance timetables to make sure they don't fall behind.
Cross-border data and global competition
Cross-border data movement is another topic of contention. Digital payment companies, especially those that use global cloud infrastructure, will need to know what kinds of data must stay in India. A localisation-heavy approach could make it more expensive to follow the rules and make it harder to deploy global fraud intelligence networks. But if these laws are put into place with a balanced, risk-based view, they can help India preserve its sovereignty while also making its fintech sector competitive on the world stage.
Creating an ecosystem based on trust
In the end, the DPDP Act should be seen as more than just a way to follow the rules; it should be seen as a chance to make a strategic move. Trust is what makes digital payments possible, and protecting data is a key part of keeping that trust. In this new era of regulation, the companies that will do best are those who:
- Don't see consent as a barrier; see it as a way to build loyalty
- Make governance and security systems that are strong and go above what is required
- Work with regulators to create implementation that is useful and encourages innovation
- Educate consumers about their rights so that being open gives them an edge over competitors
India's digital payments story has always been about big steps, like UPI's global recognition and record transaction volumes. The DPDP Act is the next big step. It changes the focus from speed and size to safety and long-term viability. If done right, it can help the Indian payments ecosystem become not only the world's most dynamic payments industry, but also the most trustworthy.
Authored by Vishal Maru, Global Processing Head at FSS (Financial Software and Systems). The views expressed are personal and do not reflect those of the publication. |
