Sebi and Irdai tighten oversight as deceptive online practices raise concerns across e-commerce, banking, insurance and fintech sectors

India’s digital economy has witnessed unprecedented growth over the last few years, with millions of consumers shifting towards online platforms for shopping, investments, banking, insurance and financial services. However, the rapid expansion of digital transactions has also brought a new challenge for regulators — the growing use of dark patterns, or deceptive design practices that influence consumer decisions.

A recent study has revealed that nearly 95% of India’s top listed consumer-facing companies use at least one dark pattern on their digital platforms, highlighting the scale of the issue. The findings have triggered stronger action from regulators, including the Securities and Exchange Board of India (Sebi) and the Insurance Regulatory and Development Authority of India (Irdai), as authorities look to improve transparency and protect consumer interests.

Dark Patterns: The Hidden Influence Behind Digital Decisions

Dark patterns are design strategies used by websites and mobile applications to manipulate users into taking actions they may not have intended.

Unlike traditional advertising, where companies openly promote products, dark patterns work silently through interface design, default settings and user journeys.

Some common examples include:

• Adding hidden charges at the final payment stage

• Making subscription cancellation difficult

• Automatically enrolling customers into paid services

• Creating false urgency through countdown timers

• Pushing users to share unnecessary personal information

• Using confusing buttons and misleading options

Regulators believe such practices can weaken consumer choice and create unfair advantages for businesses.

Study Reveals Widespread Use Among Listed Companies

Consumer advocacy platform LocalCircles analysed more than 310 digital platforms using consumer complaints, public feedback and artificial intelligence-based detection tools.

The study found that:

• Around 95 out of 100 listed consumer-facing companies use at least one dark pattern

• Deceptive practices appear across multiple stages of the customer journey, including product selection, payments and refunds

• Only a handful of companies were identified as following completely transparent digital practices

The companies identified as free from dark patterns included:

• Meesho

• Page Industries (Jockey)

• Hamleys (Reliance Retail)

• ECOS Mobility & Hospitality

• Easy Trip Planners (EaseMyTrip)

The findings have also raised questions about self-certification systems, as several companies that claimed compliance were later found to have certain manipulative design elements.

Forced Actions and Hidden Pricing Remain Major Concerns

The research highlighted several categories of dark patterns that are commonly used by digital platforms.

Forced Action – The Most Common Practice

Around 72% of analysed platforms reportedly used forced action techniques. These include requiring customers to create accounts, share personal details or subscribe to notifications before completing a simple activity.

Drip Pricing Creates Payment Surprises

Nearly 65% of platforms used drip pricing, where additional fees, charges or add-ons are revealed only at the final stage of checkout.

This practice is especially concerning in sectors such as travel bookings, online shopping and digital services.

Interface Manipulation and Subscription Traps

Other commonly observed practices include:

• Interface interference (52%)

• Bait and switch strategies (52%)

• Nagging notifications (36%)

• Subscription traps (33%)

These methods are designed to make users choose options that benefit businesses rather than consumers.

Financial Services and Digital Platforms Under Greater Watch

Dark patterns are becoming a major concern in sectors where consumers make financial decisions or purchase essential services online.

Industries facing higher scrutiny include:

• Digital lending platforms

• Online banking applications

• Insurance platforms

• Investment applications

• E-commerce marketplaces

• Edtech platforms

• Food delivery apps

• OTT services

• Travel booking platforms

For financial services companies, regulators believe that misleading digital journeys can impact investor awareness, increase mis-selling risks and reduce trust in online ecosystems.

Dark Patterns Could Cost Consumers Thousands of Crores Every Year

The economic impact of deceptive digital practices is becoming significant.

According to industry estimates, Indian consumers may lose approximately ₹25,000–28,000 crore annually due to manipulative online designs.

With India having one of the world’s fastest-growing digital consumer bases, even small hidden charges or unwanted subscriptions can create a massive financial impact when multiplied across millions of users.

Consumer trust is emerging as a key competitive factor, with users increasingly preferring platforms that offer transparent pricing, simple cancellation processes and clear communication.

Sebi’s Proposed Advertisement Code Targets Misleading Financial Practices

India’s capital market regulator Sebi has proposed a new Common Advertisement Code (CAC) 2026 to improve transparency in financial advertisements and investor communications.

The proposed framework aims to prevent regulated entities from using dark patterns such as:

• False urgency

• Hidden charges

• Misleading default options

• Subscription traps

• Confirm shaming

• Disguised advertisements

The rules will cover various digital touchpoints, including:

• Investment applications

• Websites

• Social media promotions

• Investor onboarding processes

• Marketing campaigns

Sebi has also proposed restrictions on promotional offers such as trading incentives, cashback schemes and free subscriptions that may encourage unnecessary investment activity.

Irdai Plans Independent Audits Across Insurance Industry

The insurance regulator Irdai has also started taking steps to identify and eliminate deceptive digital practices.

The regulator plans independent assessments of insurance companies after many insurers reported through self-declarations that they were free from dark patterns.

Irdai is particularly examining:

• Excessive collection of customer data

• Difficult insurance comparison processes

• Misleading product recommendations

• Lack of transparency during policy purchase

The move comes as regulators globally focus on improving digital consumer protection standards.

From Self-Regulation to Strict Accountability

India’s digital ecosystem is expected to continue expanding rapidly, but regulators are now making it clear that growth cannot come at the expense of consumer trust.

The increasing focus from Sebi, Irdai and consumer protection authorities indicates a shift from voluntary compliance towards stronger monitoring, audits and accountability.

For listed companies and digital businesses, transparent customer journeys are likely to become not just a regulatory requirement but also a competitive advantage.

As India moves deeper into a digital-first economy, companies that prioritize ethical design and consumer confidence could emerge as long-term winners.