How Do Digital Credit System Ensure the Security of Consumer Data



Digital Credit System is taking on the credit and lending ecosystem by the storm. There has been a surge of startups and enterprises working across the nations to make the credit system smooth and efficient for its consumers. The response to digitalization of the credit ecosystem has been unprecedented too. Consumers are shedding old practices and getting into the new habit of registering, applying, uploading documents and waiting on approval for their Instant Personal loan through their laptops and smart-phones.

These efficient processes have been only possible by the never-ending evolution of Fintech that innovate using technologies such as cloud services, Artificial intelligence and Machine Learning.   As the fintechs deal with sensitive financial data of its consumers on a daily basis, the concern around its safety and security becomes imperative. We will discuss the methods fintech uses to secure credit and financial information of its consumers while delivering their ace services. Read more to find out about the governing principles that fintech use as a guiding light when it comes to securing consumer data.

Significance of Consumer Data

Data is the most important currency in the world we live in today. It also is the most vulnerable asset of you, and that’s why it needs to be protected and secured. It becomes all the more important when we talk about financial data that fintechs deal in. There are several reasons why companies use consumer data to improve consumer experience, refine their marketing strategies, transform data into cash flow, and finally to secure more data.

There are four types of consumer data companies collect: Personal Data, Engagement data, Behavioral data, attitudinal data. Data in our times have become so important that there is a dedicated vertical and science (Data Science) for collection, transformation and drawing sense from data. Read more to find out the transparency and mechanisms credit systems use to protect its consumers data.

Transparency of Data

Lenders have a responsibility to provide all the necessary information about a product or service they provide, particularly the information on how secure they keep their data. It should be done to enable clients to understand and make informed choices.

Mechanisms for Complaint Redressal

While digitalization has eased a lot of problems that arose in the offline credit ecosystem, the lack of person-to-person contact involved is yet to be up-scaled by the virtual credit space.

The lack of such contact in digital lending space models heightens the challenge of providing adequate complaint resolution processes.

With the help of technologies such as artificial intelligence, machine learning, companies are getting a grip on understanding their consumer behavior through chat bots and virtual assistants to improve customer complaint redressal mechanisms. This also helps the consumers make aware choices to ensure secure transfer of data.

Privacy of Client Data

The privacy of client data is of utmost importance to lenders and the entire digital credit ecosystem. There have been several concerns of consumers when it comes to the privacy of their data. Some of them are:

●     Lack of information on data collection and usage

●     No consent by clients to set parameters for data sharing

●     Information is at a risk, in the case of P2P models this concerns both investor and borrower information

These are the major concerns that every consumer deals with at some stage of their business with digital credit companies. The digital credit ecosystem and agile fintechs have upgraded themselves to address the concern by introducing appropriate laws, regulations and policies to protect consumer data and consumer information sharing. The users are now informed when their data is shared with a third party. They are also informed of the consequences of data sharing.

Security and Fraud Protection

There have also been instances of fraud and security issues surrounding digital lending providers. They include imposters reaching out to the consumers as the concerned businesses through Phishing, spoofing, fake SMS, and/ or websites. Some of the third parties associated with the credit lenders have also been found to misuse the consumer data. The credit ecosystem has taken the initiative of engaging in peer-to-peer networking along with regulators in other jurisdictions. This is being practiced to stay abreast of any recent developments and emerging best practices.

In order to minimize fraud and scams for small scale investors in P2P lending platforms, some of the best practices include bank escrow account services to segregate and manage investor funds and borrower payments.

Self Regulation

In addition to the laws already put in place by the government to secure consumer data, companies have enthusiastically indulged in self regulation to protect any data breach. The credit ecosystem is also analyzing the extent to which existing regulation and guidance addresses the products, models and risks in the market. They are also diagnosing gaps and establishing practical plans to determine compliance. The industry players are also beginning to see that protecting customers is a well-made strategic business decision and the only way ahead to address issues before stricter regulations are needed.

The consumer data is the most important asset and thus it is the most vulnerable. The practices are already put in place by the government, companies and consumers to minimize and avoid any data breach possible. The companies are now more transparent about their data privacy mechanisms and policies. The consumers are now asked for consent every time their data is shared with third parties. The third parties are bound and liable by the laws to follow the data privacy regulations.

The companies are also networking with other companies in the digital credit ecosystem to come up with innovative and more secure ways to protect consumer data. While no practice is perfect and we need consistent redressal to the methods and technologies involved in protecting our data. However, the steps being taken by the credit ecosystem is in the right direction and things look positive for the lenders and the consumers.


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Location: Nagpur, Maharashtra, India

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