The Coronavirus pandemic has irrevocably demonstrated beyond doubt the transformative and outsized impact that Fintech has in our current existence. However, with initial projections estimating a rise in global poverty by nearly 60% in some cases, a considerable amount remains to be done. In order to alleviate the ravaging effects that the pandemic has had on the economy, it is clear that Fintech will have to play a larger role in helping people access financial services on-demand, anytime, anywhere.

Yet, as more and more services are made available digitally and digital innovations take over the legacy financial networks, it is critical that there be a stronger consensus built within the industry around fair and ethical data and information practices in order to safeguard the interest of both consumers and lenders alike.

Current Processes are vulnerable to Fraud & Malpractice

The current processes of data collection, storage and usage still operate in a haze of regulatory & operative ambiguity due to lack of regulatory or governance guidelines. While these frameworks are currently being finalized under the Personal Data Protection Bill within the legislature, there is a considerable need to revamp existing practices proactively to ensure that customers are not at risk.

For eg., lending institutions make use of formal credit databases and credit bureau reports for risk assessment of credit applicants. While these bureaus operate on voluntary reporting of customer transaction data by banks, the customer is completely left out of the loop. This kind of information asymmetry makes it difficult for customers to assess for themselves the kind of lenders that can provide them access to credit and simply results in rework and wastage of time and effort at multiple stages. Rejection of credit is also marked negatively in the customer’s credit history which might affect their future chances even though it might not be the customer’s fault at all.

Public registries such as business and trade journals have also started selling their databases to financial institutions without any kind of governance or explicit consent from end-customers whose data is being shared. Without a proper framework or baseline around what these data points should constitute or how the data should be interpreted it can lead institutions to draw erroneous conclusions.

Standard business practices & requirements for KYC and AML/AFT regulatory frameworks also make traditional banks disinclined towards certain demographics due to lack of historical exposure to formal banking frameworks.

Recommendations

In order to alleviate the information asymmetry and malpractices mentioned above, we make the following recommendations –

• First, customer consent should be a continual and ever-evolving process. Consent cannot be a “once-for-lifetime” option but either time-bound, system-bound or session-bound. Such authentication measures can be easily built into the lifecycle of digital applications to ensure parity of records.
• Second, customers should have opt-out clauses spelled out legibly and highlighted clearly through crisp and clear UI design. Current opt-out scenarios are convoluted by design and hence amounts to an ethical breach of trust and malpractice.
• Customers should be allowed to define which entity to share data with, when to share them and explicit consent about it’s usage and purpose. For eg., with the AA (account aggregator) framework coming into play, customers should be provided option to clearly choose which institutions or banking data they choose to share, which partner entities can access this data and when, and finally for which specific purpose – is it for Home Loan, Personal Loan or an insurance product etc.
• Finally, customers should be allowed control over a centralized information dashboard similar to a Google dashboard which provides a unified view to the customer on the usage of their data, when were they accessed, which entity accessed the same, time of access etc and related logs. This forms the final layer of transparency and makes the data sharing symmetric.

These recommendations barely scratch the surface of all that can be done to improve the overall transparency of the ecosystem. At Decimal Technologies, we are enabling institutions to build more customer-focused digital solutions while ensuring detailed data transparency and maintenance of user data logs and analytics – all of which can be exposed using API services directly to your end-customers for their benefit. Our technology enabled services such as vLog, vAnalytics helps provide an accurate, transparent picture of customer data and it’s contextual usage.