Ms Sugandh Saxena
CEO, Fintech Association for Consumer Empowerment (FACE)
Sugandh has two decades of experience across sectors like financial inclusion/microfinance, social-economic development and technology. Sugandh has diverse, well-rounded, hands- on experience leading sector-building works through the industry body and the SRO. As the Head of Self-Regulation and Compliance at MFIN, an SRO for the microfinance sector, she played a pivotal role in shaping the microfinance industry by leading conversations with regulators and industry players to formulate and enforce ethical guidelines. She has also held roles at ACTED, ITC, Self Employed Women's Association (SEWA) Bharat, and Bharat Electronics.
Ms Sugandh Saxena at the Defining Responsibility Framework, an India 2047 - Centre of Excellence Workshop
Ms Sugandh Saxena
CEO, Fintech Association for Consumer Empowerment
Key Points
- The digital lending industry is subject to evolving regulations, with the first set of regulations introduced in 2022. Compliance with regulatory requirements is crucial for ensuring consumer protection and industry integrity.
- The digital lending market has experienced significant growth, driven by factors such as the digitization of financial services, demographic trends, and changing consumer behaviour, especially accelerated by events like demonetization and the COVID-19 pandemic.
- Digital lending companies typically operate through apps or online platforms, leveraging technology to streamline lending. While the customer-facing interface is digital, the industry operates within a highly regulated framework, with partnerships between fintech companies and regulated entities.
- Digital lending companies rely on fully digital processes, from customer sourcing and underwriting to loan disbursal and repayment. These companies avoid physical branches and prioritize digital channels for customer interactions.
- Digital lending platforms leverage alternative data sources and advanced algorithms to assess borrowers' creditworthiness. They cater to a diverse customer base, including younger individuals with limited credit histories.
- Fraud prevention is a key focus area for digital lending companies, who employ advanced technologies and collaborate with industry stakeholders to detect and address fraudulent activities.
Recommendations
Continuous Regulatory Updates
- Given the rapidly evolving nature of the digital lending industry, policymakers should prioritize regular updates to regulatory frameworks to keep pace with technological advancements and emerging market dynamics. This can help ensure consumer protection, industry integrity, and innovation.
Support for Responsible Innovation
- Policymakers should create an enabling environment for responsible innovation in the digital lending sector while ensuring regulatory compliance.
- This could involve providing regulatory sandboxes for testing new products and services, fostering collaboration between industry stakeholders and policymakers, and offering incentives for companies that demonstrate responsible lending practices.
Customer Protection
- Prioritise customer protection by adopting fair lending practices, transparent communication, and responsible loan underwriting.
- Provide clear and easily understandable terms and conditions to borrowers, avoiding hidden fees or misleading information.
Data Privacy and Security
- Implement robust data protection measures to safeguard customer information and prevent unauthorised access or data breaches.
- Collaborate with industry partners to establish and adhere to data security standards and protocols.
Fraud Prevention
- Develop comprehensive fraud prevention strategies leveraging advanced technologies like artificial intelligence and machine learning.
- Establish mechanisms for detecting and promptly addressing fraudulent activities, protecting lenders and borrowers.
Customer Education
- Invest in educational initiatives to empower customers with knowledge about digital lending, including their rights, responsibilities, and potential risks.
- Provide resources and tools to help customers make informed borrowing decisions and manage their finances responsibly.
Continuous Improvement
- Continuously assess and enhance digital lending processes, user experience, and customer support based on feedback and industry best practices.
- Foster a culture of innovation within the organisation to stay ahead of market trends and effectively meet evolving customer needs.
Collaboration and Industry Engagement
- Collaborate with industry peers, regulators, and other stakeholders to address common challenges, share best practices, and promote industry-wide standards.
- Engage in constructive dialogue with regulators to contribute to developing policies that balance innovation with consumer protection.