The expansion and development of the digital payment infrastructure in India’s banking sector have led to a significant increase in the number and value of digital transactions. Yet, such transactions are inherently vulnerable to cybercrime, particularly digital payment fraud. According to a recent report published by the Indian Cybercrime Coordination Centre (I4C), digital financial frauds amounted to ₹1.25 lakh crore over the past three years. Data provided by the National Cybercrime Reporting Portal further indicate that in the year 2023 alone, victims of digital financial fraud incurred losses of at least ₹10,319 crore. This study aims to identify and examine the legal challenges associated with digital payments and their implications while proposing potential strategies to mitigate the existing risks. It also explores measures to enhance fund transfers and payment processes involving the use of digital means.