Lending risks in Fintech:

A riveting evolution of digitisation across the lending landscape in India over the past few years can be
attributed to:
• increasing internet penetration
• amplified smartphone usage
• a favourable regulatory environment
• onset of the pandemic

Some of the key challenges of the current digital lending landscape include:

• Absence of regulatory framework for digital loans such as consumer loans, instant loans, etc.
• Absence of pre-emptive safeguarding mechanisms against fraudulent lending platforms
• Lack of monitoring mechanisms for LSPs and digital lending apps

The digital lending loan lifecycle, from origination to collections, typically involves interplay amongst a number
of third parties like fintech, distributors, SaaS providers, thus exposing borrowers and institutions to new and
heightened levels of risk.

Traditional ways of risk management will need to be transformed to more proactive risk management
systems with necessary system controls/limits and early warning signals.
 Risk Mitigation
We need to regulate and formulate better standards for:
• More focus on Cybersecurity, privacy and customer servicing
• Dispute management , system availability performance and fraud

Lenders should set up robust risk control self-assessment

programme

Efforts for customer education around:

• Downloading of compliant apps and responsibly managing app permissions and access
• Careful reading of contractual terms and conditions and customer rights and awareness
• Dispute resolution and fraud management

 Rule engines and real-time behaviour identification capabilities may need to be tweaked to
identify potential anomalous transactions