India’s e-commerce boom has a dark side that’s proving hard to police: Digital deception at scale

In 1919, John Maynard Keynes marvelled at the Londoner who could order by phone “various products of the whole earth” from his bed while sipping his morning tea. A century later, India has democratized this convenience through cheap smartphones and a national system of instant mobile payments, overtaking the US to emerge as the second-largest e-retail market after China by number of shoppers.

Yet, this innovation is being hijacked by ‘dark patterns’—design elements that trick users into overpaying or paying for things they never wanted. This global scourge has assumed chaotic proportions in India. From legacy banks and duopolistic airlines to venture-backed startups, all businesses seem to be gaming their digital interface.

While digital commerce has exploded, the guardrails remain weak. Merchants are exploiting the gap between a newly connected population and online regulation that is only just starting to find its teeth.

A 2024 study across 26 countries by the International Consumer Protection and Enforcement Network found that 76% of websites and apps employed some kind of manipulation of customer choice. For India, however, the number was as high as 98%, according to a separate survey by the country’s Advertising Standards Council.

India’s aviation industry has been at the cutting edge of sharp practices. In 2024, regulators highlighted how IndiGo, the largest domestic carrier, shamed customers into buying insurance. Buttons to decline the option were labelled, “No, I will take the risk.” Authorities also investigated the obscuring of the users’ ability to skip the paid seat-selection option, forcing them to opt for expensive preferential seating.

Deceit abounds even in competitive sectors. Zepto was recently fined for auto-enrolling buyers into premium subscriptions, among other things. Its US rivals operating in India faced scrutiny for fees that appear only at the checkout, wiping out the discounts advertised on the product page.

Although Walmart-owned Flipkart and other platforms submitted self- or third-party audit declarations in November, the consumer protection authority is currently verifying their claims that they have eliminated dark patterns.

Sachin Taparia, founder of a New Delhi-based community engagement forum, has written to India’s securities regulator with suggestions for a form that all listed companies—and those waiting to go public—must sign. It lists 14 malpractices that work differently on the consumer’s psyche.

These retail manoeuvres are the gateway to a more dangerous frontier: the financial sector. While a hidden fee on a grocery bill is a nuisance, the banking sector’s embrace of dark patterns represents a systemic breach of trust. Despite a central bank order to eliminate these practices by July, a recent survey found that half of customers still encounter them.

The most egregious malpractice involves the unethical harvesting of user information. In one instance, a consumer who merely clicked a credit-card ad was bombarded with phone calls by bank officials who already had his personal financial details.

In the EU, such a data breach would trigger penalties of up to 4% of global revenue. In India, companies shrug off minuscule fines as a cost of doing business. Zepto’s fine was just ₹7 lakh.

When banks keep data guardrails intentionally weak, information leaks. As I wrote last year, this fuels ‘digital arrests’—a sophisticated scam where gangs, often based overseas, pose as law enforcers to accuse affluent Indians of money laundering, human trafficking or drug smuggling.

These con artists succeed because they have acquired granular details about their victims’ finances—often leaked or sold through the same porous systems that banks use to nudge customers into products designed to buttress their balance sheets rather than benefit borrowers.

A fundamental disregard for an individual’s choice and data sovereignty is the dark side of India’s digital gold rush.

Keynes, who began his career at the India Office, helping manage a subcontinent’s finances from a desk in London, marvelled at the consumerism of his day as a pinnacle of pre-World War I globalization. He couldn’t possibly have imagined a future where bedside convenience would be weaponized in a country he thought about more as a producer than a consumer; where the telephone’s pocket-sized successor is used not by an administrator to serve a citizen of the empire, but by a rapacious business algorithm or a criminal to surveil and entrap a target. ©Bloomberg

The author is a Bloomberg Opinion columnist covering industrial companies and financial services in Asia.