This registered not-for-profit industry association is formed by consumer-focused fintech lenders, who aim to drive the growth of the fintech ecosystem and accelerate the themes of digitization and financial inclusion in this evolving market.
India has been shining in the fintech sector for years now. Indian consumers have taken to digital lending platforms in a big way, which in turn has ensured that more players enter the field.
To bring together these different players in India’s fintech industry, a group of founding members of fintech companies have formed a not-for-profit industry body called Fintech Association for Consumer Empowerment (FACE).
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FACE attempts to start a regular dialogue and working relationship with industry policy stakeholders such as Reserve Bank of India (RBI), Ministry of Finance, planning bodies like Niti Aayog and other government authorities.
The current FACE members have been a key part of the fintech lending ecosystem in India for the preceding three-four years and serve a cumulative consumer base of over 45 lakh consumers across 19,000 Pin-codes in India as on date. Many of the customers are from Tier 2 and Tier 3 cities, which is a heavily underserved market.
The members of FACE comprise of founders of leading digital lending platforms, such as EarlySalary, KreditBee, Kissht, CashE, and LoanTap.
The Tech Panda spoke to Anil K. Pinapala, Founder and CEO, Vivifi India Finance, and Akshay Mehrotra, Co-Founder and CEO, EarlySalary, both members of FACE, to learn about what they do.
Anil K Pinapala
FACE is also formed to constantly engage with other ecosystem players to bring for the latest thinking on fintech, technology adoption, financial literacy and best customer experience strategies
“FACE is also formed to constantly engage with other ecosystem players to bring for the latest thinking on fintech, technology adoption, financial literacy and best customer experience strategies,” says Pinapala.
The organization is a registered not-for-profit industry association formed by consumer-focused fintech lenders who drive the growth of the fintech ecosystem and accelerate the themes of digitization and financial inclusion in this evolving market. The association is committed to working with regulatory bodies in promoting and monitoring the highest standards of fair practices for strengthening the digital credit lending landscape in India.
Akshay Mehrotra
FACE is the only pure-play digital lenders association and came together with the idea of ‘self-regulation’ and is building on the philosophy
“FACE is the only pure-play digital lenders association and came together with the idea of ‘self-regulation’ and is building on the philosophy,” says Mehrotra.
Challenges Indian Fintech Faces
India is a growing market for fintech with a population of nearly 1.37 billion. A huge percentage of the unbanked and under-banked population is making India an exhilarating global space for financial technologies.
“Despite the fast growth, fintech companies are new in India and standing upfront against the traditional institutions. Backed by innovation, modernity and digital agility, these companies are faced with several challenges on their way ahead,” Mehrotra explains.
Despite the fast growth, fintech companies are new in India and standing upfront against the traditional institutions. Backed by innovation, modernity and digital agility, these companies are faced with several challenges on their way ahead
Here are some of the challenges fintech companies face in India.
Emotional attachment for cash
The fintech industry is trying to create a cashless economy in a country that loves cash. People in India are religiously, culturally, and emotionally attached to using cash.
“The challenge here is to win credibility over cash. Any innovation in its initial days of establishment faces the question of credibility, and fintech space is no different,” Pinapala says.
Lack of awareness
More than 70% population of India live in the villages and use of these digital payment platforms are done mostly by the urban people. This sector needs to make its way through awareness in rural India.
Data Security and Privacy Risk
Fintech has improved the products and services of traditional financial services. But the central problem of the industry is the hidden risks of data security and privacy risk that mainly includes data breaches, third-party security threat, malware risk, application security risk, cloud-based security threat and also digital identity risks.
Banking regulations
Banking is a heavily regulated business, with high transaction and operating costs, and fairly constant business models. Uncertain and restrictive regulatory frameworks sometimes act as massive barriers for the new fintech businesses.
“Given that fintech companies are designed to work with a sophisticated working model, the stiff regulatory norms can seem to limit these companies,” says Mehrotra.
How FACE is Working to Help the Indian Economy
To champion the fair and responsible lending practices in consumer finance, FACE published the ‘Ethical Code of Conduct” to promote the best guidelines in digital credit lending and to safeguard consumer’s rights and interests.
“With the Digital India initiative, driving a digitally empowered society and knowledge economy, maintaining an ethical code of conduct with larger accountability and transparency is essential,” Pinapala explains.
With the Digital India initiative, driving a digitally empowered society and knowledge economy, maintaining an ethical code of conduct with larger accountability and transparency is essential
FACE has collated and presented the best approaches to improve the digital lending ecosystem in India. The association also presented the finding to the RBI working committee members to help them formulate effective policies to regulate digital lending apps.
Amid growing concern around possibilities of digital lending-based financial frauds, the RBI formed a working group to regulate digital lending in financial sector. Its aim was to evaluate digital lending activities and assess the penetration and standards of outsourced digital lending activities in RBI regulated entities.
“We reported the Chinese and foreign digital lenders to the regulator and Google. Then Google managed to pull down some of these digital lending apps from Play store in India. We educated consumers on how the Chinese and foreign digital lending apps were operating and cautioned them not to fall prey,” Mehrotra relates.
“We at FACE consider the importance of digital lending towards the financial inclusion in the Indian economy on one hand and the regulations and best practices required to ensure a transparent and favorable ecosystem for all stakeholders on the other,” Pinapala adds.
RBI Moratorium
Because of the impact of COVID, digital lenders have been seeking an extension of the RBI moratorium from banks and NBFCs. FACE members says the moratorium comes as a relief to people facing liquidity crunch in paying off their Equated Monthly Installments (EMI) amid these Covid-induced lockdowns.
We are aligned with RBI’s measure to achieve a two-sided moratorium that maintains the stability of the financial system
“FACE believes that extending RBI’s moratorium to all retail borrowers is only possible at scale if large banks and NBFCs who lend to digital lending companies also extend the moratorium. We are aligned with RBI’s measure to achieve a two-sided moratorium that maintains the stability of the financial system. Without a back-to-back moratorium on the funding side, all retail lenders would struggle to extend the moratorium widely to their end customers,” Mehrotra comments.
Fintech Best Practices to Minimize Security Trends
The fintech industry has been undergoing quite a few changes over the last few years. Financial institutions that were once very traditional are now looking to adopt best practices used by more agile and flexible FinTech organizations.
These practices will not only enable these organizations to adapt to a fast-changing and increasingly tech-driven industry ecosystem, but also meet the rising expectations of their research-savvy and technologically inclined customer base
“These practices will not only enable these organizations to adapt to a fast-changing and increasingly tech-driven industry ecosystem, but also meet the rising expectations of their research-savvy and technologically inclined customer base,” says Pinapala.
Some of the best practices that FACE supports are as follows:
- Personalizing the customer experience – One of the key factors in being successful in the coming years will be offering a personalized customer experience to your customers. providing a personalized service would change their loyalty to their bank.
- Collecting and analyzing consumer data in real-time – Software capable of collecting ‘real-time’ insights is highly desirable in the world of customer experience and in the finance industry.
- Adhering to data privacy and protection guidelines – As we know, data is the new oil. In this space, huge data will be gathered by Companies, it’s important that Data Security & Privacy is taken seriously.
Future of Indian Fintech
The future of the fintech industry looks shinning and growing rapidly on the back of rise of fintech startups that have penetrated smart phone users, continuous build-up of the digital infrastructure and overall streaming of financial process in many industries.
The future of fintech lies in the implementation of agile technologies and strengthening data security policies
In a recent report, by Research and Markets, as of March 2020, India alongside China, accounted for the highest FinTech adoption rate 87%, out of all the emerging markets in the world. On the other hand, the global average adoption rate stood at 64%. The report also states that “The FinTech market in India was valued at Rs 1,920.16 billion in 2019 and is expected to reach Rs 6,207.41 billion by 2025, expanding at a compound annual growth rate (CAGR) of approximately 22.7 percent during the 2020-2025 period.
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“The future of fintech lies in the implementation of agile technologies and strengthening data security policies. FACE believes that the ecosystem requires self-regulatory organization (SRO) to help formulate the right policies and practices among the players in the lending ecosystem,” says Mehrotra.
“The Government of India’s Startup Ecosystem, Digital India Movement and JAM (Jan-Aadhar-Mobile) trinity have been adding momentum for consumer adoption of digital finance. FACE aims to further transform the fintech market and the association’s formation represents a significant step forward for the future of consumer finance in India,” Pinapala concludes.
