FACE and CFI launch fintech lending risk barometer
To systematically identify and assess the risks in the fintech industry, the Fintech Association for Consumer Empowerment (FACE) and Center for Financial Inclusion (CFI) has launched what it claims is India’s first Fintech Lending Risk Barometer. This risk barometer study aims to create a systematic baseline for emerging risks and is part of a market monitoring exercise to understand how risks are changing and how stakeholders perceive these risks as the Indian fintech lending sector evolves.
The insights are from a survey conducted among 40 industry stakeholders 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 illegal fintech lenders as the top 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 #2 when it came to risk to the fintech industry, with 83% of all respondents ranking cyber fraud under a serious risk category for the industry.
Data privacy was ranked No. 3 in terms of risk to the fintech industry, with 73% of all respondents ranking data privacy as a serious risk to the industry. Lenders were explicitly concerned about the lack of clarity about data ownership, compliance and robust mechanisms to protect and properly use consumer data they have access to.
While financing was ranked No. 8 overall, lenders ranked financing risk as the third highest risk. Fifty-seven percent of all respondents ranked funding as a serious risk for the fintech lending industry; the reason is unequal access to capital among fintech borrowers. Macroeconomic situation, hiring talent and increasing competition ranked as the lowest risk by both lenders and non-lenders.
“Uniform and shared awareness and assessment of risks is core for the fintech lending industry to address them individually and collectively. Evidence allows the industry to prioritize and act decisively to address the risks to create a safer lending ecosystem for 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 of FACE.
“Effective market conduct oversight depends on timely identification of market risks and understanding how those 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 developing,” said Jayshree VenkatesanDirector, Consumer Protection and Responsible Finance, CFI.
The insights are from a survey conducted among 40 industry stakeholders 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 illegal fintech lenders as the top 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 #2 when it came to risk to the fintech industry, with 83% of all respondents ranking cyber fraud under a serious risk category for the industry.
Data privacy was ranked No. 3 in terms of risk to the fintech industry, with 73% of all respondents ranking data privacy as a serious risk to the industry. Lenders were explicitly concerned about the lack of clarity about data ownership, compliance and robust mechanisms to protect and properly use consumer data they have access to.
While financing was ranked No. 8 overall, lenders ranked financing risk as the third highest risk. Fifty-seven percent of all respondents ranked funding as a serious risk for the fintech lending industry; the reason is unequal access to capital among fintech borrowers. Macroeconomic situation, hiring talent and increasing competition ranked as the lowest risk by both lenders and non-lenders.
“Uniform and shared awareness and assessment of risks is core for the fintech lending industry to address them individually and collectively. Evidence allows the industry to prioritize and act decisively to address the risks to create a safer lending ecosystem for 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 of FACE.
“Effective market conduct oversight depends on timely identification of market risks and understanding how those 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 developing,” said Jayshree VenkatesanDirector, Consumer Protection and Responsible Finance, CFI.
