Aiming to systematically identify and assess the risks in the fintech industry, Fintech Association for Consumer Empowerment (FACE) and the Center for Financial Inclusion (CFI) have launched 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.
"Uniform and common awareness and assessment of risks are core to the fintech lending industry to address them individually and collectively. 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, chief executive officer (CEO) of FACE.
Established in 2020, Fintech Association for Consumer Empowerment (FACE) is an industry association and self-regulatory body for fintech lenders set up as a non-profit company. It brings together fintech lenders (regulated balance-sheet lenders and platforms/aggregators partnering with the regulated balance-sheet lenders) and other stakeholders committed to fair and responsible digital lending practices through self-regulation and customer-centricity.
The Center for Financial Inclusion (CFI) aims to advance inclusive financial services for people who currently lack financial tools.
The survey which was conducted amongst 40 industry stakeholder lenders and non-lenders, including think tanks, consumer associations, and investors 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.
It ranked cyber fraud as number two when it came to risk to the fintech industry, with 83 per cent of all respondents ranking cyber fraud under a severe risk category to the industry. Data privacy was ranked number three regarding risk to the fintech industry, with 73 per cent of all respondents ranking data privacy as a severe risk to the industry.
The study reportedly followed a mixed methods approach. A survey method was used to gather initial perceptions of risks. This was followed by a series of qualitative interviews with select respondents to deepen their understanding of emerging risks and how they impact consumer lives.