Introduction
The Unified Payments Interface (hereinafter referred to as “UPI”) has changed India’s payment systems by offering quick and easy digital transactions to all whether customers are at a big store or getting groceries from a small roadside vendor. UPI has played a pivotal role in the country’s digital payment adoption and integration. The users have now the option to authorize UPI transactions by means of facial recognition and fingerprints, thus eliminating the need to input a four-digit PIN. This creative feature, which relies on Aadhaar-linked biometric tech, assures maximum user comfort, system security and inclusivity. This biometric UPI integration is transforming digital payment systems across India. Users no longer need to show an independent form of identification or proof of payment before transactions, and all the identification verification is done greatly and in real time.
The Technological and Regulatory Framework
The biometric UPI system is built on two phases of verification systems. The first phase uses Aadhaar biometric verification by the Unique Identification Authority of India (“UIDAI”) via the FaceRD app. Users can set or reset a UPI PIN using real-time Aadhaar facial verification. For biometric authentication on devices, transactions up to ₹5,000 can be authorized by a smartphone fingerprint or facial recognition without a PIN. A key characteristic of this authentication method is that biometric matching takes place entirely on the device. None of the user’s biometric information leaves the phone. Only Aadhaar-linked PIN verification is done through UIDAI’s servers, protected by encryption, liveness detection, and other means to ensure privacy and safe transmission of data. The Reserve Bank of India’s (“RBI”) policy, through technology-neutral, risk-based authentication from the September 2025 guidelines, recognizes biometrics as something the user is, as a valid component of two-factor authentication.
UPI’s National Payments Corporation of India (“NPCI”) has issued guidelines that biometric adoption be:
- Voluntary participation (opt-in)
- Explicit Consent
- Compliance with the Digital Personal Data Protection Act, 2023 (“DPDPA”)
The collaboration of technology regulation and innovation without the compromise of privacy and user autonomy is enabled by the interplay of the RBI, NPCI, and UIDAI.
User Experience and Practical Benefits
Biometric authentication innovations change how users interact with services. Users do not need to enter numbers for a PIN, all they do is scan and tap. This change enhances the speed and ease of transactions for everyone. PINs and numeric keypads are a challenge for the elderly and rural users. Biometric authentication adds a layer of security against threats like PIN stealing and phishing. Users are more confident to authorize payments with unlocked phones as a biometric verification measure. They retrieve and reset their PINs more easily with no hassle of OTPs and with UIDAI’s FaceRD instant face verification. These enhancements provide a payment experience with the right mix of speed, safety, and trust.
Industry Adoption and Ecosystem Impact
Increasing numbers of banks and payment service providers are upgrading their infrastructure to comply with the biometric authentication framework and to meet the RBI authentication guidelines. Google Pay, PhonePe, and Paytm are examples of major fintech services that already use biometric authentication technology. Using biometric technology is an empowering shift in Indian Fintech. Secure ‘digital empowerment’ is the new focus, moving beyond the use of technology to integrate people excluded financially. India is including the financially underserved in its expanding biometric-enabled financial ecosystem. Technological challenges will be addressed. In the most basic ‘low-end’ devices, the secure biometric technology lacks in basic accessibility. Constant and trustworthy data protection measures and open practices will fulfill the need for privacy. The gap in digital literacy regarding biometric technology will be most safely addressed through voluntary initiatives. Coordinated action involving biometric-based UPI technology can secure India’s position as an inclusive architecture for global Fintech.
Legal Dimensions
Under the new Data Protection Act, biometric data including facial and finger prints are personal data. Entities handling biometric data, including banks and UPI app providers are considered Data Fiduciaries and must ensure that:
- Consent is specific, informed, and freely given
- Data is used solely for authentication purposes
- All collected biometric data is erased once its purpose is fulfilled
Global Perspective
Globally, there seems to be an increase in the usage biometric payments, though differences in jurisdiction and privacy philosophy account for varying approaches. In China, people have grown accustomed to payments being made using facial recognition, and systems such as Alipay and WeChat are regarded as ‘centralized systems’ with little privacy oversight. This promotes broad use, though concerns regarding surveillance and the security of personal data are justified. In the EU, the PSD2 regulation on Strong Customer Authentication (“SCA”) does allow Biometric SCA as one of the options, though it is heavily encumbered with the privacy restrictions of the GDPR. Biometric privacy in Europe focuses on consent and declaring active intent to process a biometric, the right to use biometrics for authentication and payments, and the right to withdraw at any time. Each state is relatively independent of the others in terms of privacy, as is the case with the use Apple Pay and Google Pay in the U.S. with on-device biometric authentication. The use of Aadhaar-linked identity verification in India, with on-device authentication as the head of combination, means India is the first country to have the benefits in privacy of the Western systems and the scale and inclusivity of the Eastern systems.
AMLEGALS REMARKS
The introduction of biometric authentication for UPI represents more than technological progress; it signals a policy shift towards secure, privacy-conscious financial inclusion. It bridges technology, law, and user trust in a manner that few jurisdictions have attempted at scale. For fintech companies to be successful in the long run, they should apply the principles of privacy-by-design, have transparent consent mechanisms, regularly carry out Data Protection Impact Assessments, and put user education first. Conversely, policymakers must give the necessary legal flexibility promoting innovation and at the same time protecting the rights of individuals. When biometric UPI is properly used, it can be a global standard for secure, inclusive, and privacy-aligned digital finance.
For any queries or feedback, feel free to connect with hiteashi.desai@amlegals.com