Discuss the evolving trends of Digital Transactions in India. What are...

  Jun 03, 2017

Discuss the evolving trends of Digital Transactions in India. What are the risks involved and what measures can be taken to make digital space more secure for its users?

Digital lending consists of lending through Web platforms or mobile apps, by leveraging technology for authentication and credit assessment.
Digital lending promises to be a respite for the “ordinary Indian” who is starved of institutional credit.
Three out of five Indians continue to remain primarily dependent on informal credit. There is a huge unmet credit need (approximately $400 billion plus per year), particularly in the microenterprise and low-income consumer segment. Indians continue to borrow from family and friends, and moneylenders, sometimes at usurious rates, primarily because these loans are more flexible and convenient. Institutional lenders are unable to lend without appropriate collateral, and the high costs of lending limit the flexibility of lending products.
This is where digitization can be instrumental in enabling inclusive lending. India is the only country in the world with a billion unique digital IDs and more than 600 million mobile-phone users.
The emergence of digital data trails—the histories of an individual’s past digital activity, such as phone call and SMS records, remittance data, social media footprint—that can be tracked, archived and used for credit assessments, opens up the potential of inclusive digital lending. Emerging business models are already leveraging these digital data trails—digital data credit-scored lending, peer-to-peer platforms and invoice discounting—to lend to lower-income Indians.
“India Stack”—a set of digital application programming interfaces (APIs), which can transition consumer lending to cashless, presence-less and paperless transactions by leveraging their digital data trails.
It builds on the Aadhaar platform and has the potential to unleash digital lending by reducing the cost of lending, and channelizing access of data trails for credit assessments. Digital lending has the potential to be a remarkably positive force for inclusion.
However, there are three major risks in the digital lending space that the Indian borrowers may face.
Four measures that regulators should consider to address the risks involved in digital lending.
In addition, it is incumbent upon providers to invest in more user-friendly products: developing intuitive products that will help consumers better understand loans and consent protocols so they can make truly informed choices.
India stands on the cusp of a digital lending revolution. Ensuring that this lending is done responsibly can ensure the fruits of this revolution are realized.