To systematically identify and assess the risks in the fintech industry, Fintech Association for Consumer Empowerment (FACE) and Center for Financial Inclusion (CFI) has launched what they claim is India’s first Fintech Lending Risk Barometer. This risk barometer study aims to create a systematic baseline of emerging risks and is part of a market monitoring exercise to understand how risks change and how stakeholders perceive these risks as the Indian fintech lending sector evolves.
The insights are from a survey conducted amongst 40 industry stakeholder lenders and non-lenders, including think tanks, consumer associations, and investors. Some of the key trends in the Fintech Lending Risk Barometer include:
The ‘biggest risk’
Survey participants, regardless of their role in the fintech lending ecosystem, identified unlawful fintech lenders as the foremost risk. Such illegal lenders or lending apps harm consumers with unethical practices and create reputational and other risks for the regulated fintech lending industry. Cyber fraud was ranked No. 2 when it came to risk to the fintech industry, with 83% of all respondents ranking cyber fraud under a severe risk category to the industry.
Data privacy was ranked No. 3 regarding risk to the fintech industry, with 73% of all respondents ranking data privacy as a severe risk to the industry. Lenders were explicitly concerned about the lack of clarity on data ownership, compliance, and robust mechanisms to protect and appropriately use consumer data they access.
While overall, funding was ranked No. 8, lenders ranked funding risk as the third highest risk. Fifty-seven percent of all respondents ranked funding as a severe risk to the fintech lending industry; the reason being inequitable access to capital among fintech lenders. Macroeconomic situation, hiring talent, and rising competition ranked as the lowest risks by both lenders and non-lenders.
“Uniform and common awareness and assessment of risks are core to the fintech lending industry to address them individually and collectively. Evidence allows the industry to prioritise and act decisively in addressing the risks to create a safer lending ecosystem for the customers. The ranking of risks will change over time for the fintech lending industry, which is still rapidly evolving. As an industry, it is important that we constantly and collectively share our experiences and information. This risk barometer by periodically monitoring emerging risks can provide a sense of opportunities and dangers that must be addressed for a healthier digital lending ecosystem,” said Sugandh Saxena, CEO, FACE.
“Effective market conduct supervision depends on the timely identification of market risks and understanding how these risks evolve with market growth and development. The new report draws on CFI’s global experience in consumer protection and FACE’s deep knowledge of the Indian market to provide actionable insights for the fintech lending market in India, and for other emerging markets where digital lending is present and evolving,” said Jayshree Venkatesan, Director, Consumer Protection & Responsible Finance, CFI.
The insights are from a survey conducted amongst 40 industry stakeholder lenders and non-lenders, including think tanks, consumer associations, and investors. Some of the key trends in the Fintech Lending Risk Barometer include:
The ‘biggest risk’
Survey participants, regardless of their role in the fintech lending ecosystem, identified unlawful fintech lenders as the foremost risk. Such illegal lenders or lending apps harm consumers with unethical practices and create reputational and other risks for the regulated fintech lending industry. Cyber fraud was ranked No. 2 when it came to risk to the fintech industry, with 83% of all respondents ranking cyber fraud under a severe risk category to the industry.
Data privacy was ranked No. 3 regarding risk to the fintech industry, with 73% of all respondents ranking data privacy as a severe risk to the industry. Lenders were explicitly concerned about the lack of clarity on data ownership, compliance, and robust mechanisms to protect and appropriately use consumer data they access.
While overall, funding was ranked No. 8, lenders ranked funding risk as the third highest risk. Fifty-seven percent of all respondents ranked funding as a severe risk to the fintech lending industry; the reason being inequitable access to capital among fintech lenders. Macroeconomic situation, hiring talent, and rising competition ranked as the lowest risks by both lenders and non-lenders.
“Uniform and common awareness and assessment of risks are core to the fintech lending industry to address them individually and collectively. Evidence allows the industry to prioritise and act decisively in addressing the risks to create a safer lending ecosystem for the customers. The ranking of risks will change over time for the fintech lending industry, which is still rapidly evolving. As an industry, it is important that we constantly and collectively share our experiences and information. This risk barometer by periodically monitoring emerging risks can provide a sense of opportunities and dangers that must be addressed for a healthier digital lending ecosystem,” said Sugandh Saxena, CEO, FACE.
“Effective market conduct supervision depends on the timely identification of market risks and understanding how these risks evolve with market growth and development. The new report draws on CFI’s global experience in consumer protection and FACE’s deep knowledge of the Indian market to provide actionable insights for the fintech lending market in India, and for other emerging markets where digital lending is present and evolving,” said Jayshree Venkatesan, Director, Consumer Protection & Responsible Finance, CFI.
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