RBI’s revamp of digital payment authentication draws praise from experts

RBI’s new digital payment rules to strengthen security with risk-based authentication from April 2026

India’s digital payments landscape is set for a major upgrade as the Reserve Bank of India (RBI) introduces new digital payment authentication guidelines, effective April 2026. The revised framework will require banks to adopt a risk-based authentication model, marking a shift from the existing one-size-fits-all approach to one that adjusts verification levels based on transaction risk.

While the two-factor authentication (2FA) mandate remains, the new model moves beyond the traditional one-time password (OTP) system. Instead, it introduces dynamic checks that evaluate factors such as device integrity, user behavior, location, and transaction history to determine whether a transaction appears suspicious.

“This is a long-overdue step in India’s fast-expanding digital payments ecosystem,” said Anand Venkatraman, Partner at Deloitte India. “By using behavioral and contextual signals, banks can reduce false rejections and detect fraud early. Fraudsters constantly adapt, so layered, adaptive security is far more effective than static two-factor authentication.”

Under the new framework, banks will be able to offer alternative authentication methods such as biometric verification or device-binding as one of the two required authentication factors.

Transactions that appear risky—say, originating from a new device, taking place at odd hours, or conducted overseas—could trigger an extra layer of verification, while routine payments like bill settlements or small-value purchases will remain smooth and uninterrupted.

Industry backs RBI’s move

The new directions have been widely welcomed by cybersecurity and fintech experts, who see the move as both progressive and globally aligned.

“By shifting from blanket authentication to context-driven verification, RBI is prioritizing both security and convenience,” said Ajay Trehan, Founder of AuthBridge.

Echoing that sentiment, Sundareshwar Krishnamurthy, Partner and India Cyber Leader at PwC India, said the framework reflects India’s move towards a ‘zero-trust’ architecture—a model where security checks happen silently in the background and surface only when anomalies arise.

“The key will be to integrate security seamlessly into the user experience,” he noted, pointing to tools like biometrics, device binding, and behavioral analytics.

Implementation challenges ahead

Experts cautioned, however, that rolling out the framework won’t be straightforward. Many banks will need to upgrade core systems to support modern security tools such as AI-based fraud detection and behavioral analytics, all while maintaining real-time performance.

Venkatraman added that the transition could widen the rural-urban gap, since OTPs will still be necessary for users with limited smartphone or biometric access.

The new directions also mandate interoperability across applications, which will affect how banks and fintechs design their systems. For cross-border card transactions, issuers will need to verify non-recurring “card-not-present” payments and register their Bank Identification Numbers (BINs) with card networks by October 2026.

Legal and regulatory impact

The guidelines bring new compliance and liability concerns.

According to Smrithi Nair, Partner at Juris Corp, banks will carry a greater share of responsibility for fraudulent transactions. “Issuers will have to compensate customers if transactions don’t comply with RBI’s authentication norms,” she explained.

She added that the use of contextual and behavioral data for risk scoring will fall under the Digital Personal Data Protection (DPDP) Act, raising privacy considerations. Non-compliant foreign merchants, meanwhile, may face hurdles in processing cross-border digital transactions.

Balancing security with user protection

While the framework is seen as a balanced approach to user safety, experts emphasized the need for continuous oversight.

“Grievance redressal systems must evolve to protect consumers from wrongful denials,” said Anu Tiwari, Partner at Cyril Amarchand Mangaldas. “Safeguards to prevent misuse of user data in profiling are equally critical.”

Cybersecurity specialists agreed that adaptive checks are vital but warned they are not foolproof.

Huzefa Motiwala, Senior Technical Director at Palo Alto Networks, noted that many cyberattacks still begin with social engineering rather than technical exploits. “About 36% of breaches start through social engineering, and two-thirds target privileged accounts,” he said. “Adaptive checks help, but they must be supported by strong recovery and governance processes.”

He added that as attackers increasingly employ AI tools to accelerate fraud, banks too must adopt AI-driven defenses to stay ahead.

Global implications

As the world’s largest digital payments market, India’s new framework could influence global standards in payment authentication. Experts believe that, if implemented effectively, the RBI’s model may become a blueprint for how regulators worldwide balance security, convenience, and privacy in the era of intelligent payments.