A Study on Customer Perception of AI-enabled Fraud Detection in Digital Payment Systems

Abstract The swift growth of digital payments in India has revolutionized the country's financial landscape, providing millions of consumers with accessibility, speed, and convenience. The complexity and frequency of fraudulent operations, which range from identity theft and illegal transactions to phishing and data breaches, have expanded concurrently with this advancement. Financial institutions are depending more and more on Artificial Intelligence (AI)-enabled fraud detection systems that employ machine learning, predictive analytics, and behavioral modeling to spot abnormalities in real time in order to counter these changing threats. This study investigates customer perceptions of AI-enabled fraud detection in digital payment systems through secondary data collected from credible sources such as the Reserve Bank of India (RBI), the National Payments Corporation of India (NPCI), and reports by PwC and McKinsey (2023–2025). The findings indicate that while awareness and trust in AI-driven systems are growing, gaps remain among rural users and older demographics. Data visualization and correlation analysis reveal a strong positive association (r = 0.89) between awareness and perceived trust in AI tools. The results highlight that increasing transparency, data privacy assurances, and customer education initiatives are essential to improve user confidence and adoption of AI-based fraud detection. Overall, the study emphasizes AI’s transformative potential in fostering safer, more resilient, and user-centric digital payment ecosystems in India.