There is an upsurge in cyber fraud cases through illegal digital lending apps. In fact, the number of complaints against digital lending apps has more than doubled to 1,062 in FY23, the finance ministry told Lok Sabha in July 2023.

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In October, to safeguard people from online fraud and foster a reliable digital environment where they can use the internet without falling prey to scams, Google onboarded the Fintech Association for Consumer Empowerment (FACE) as a priority flagger. With this, FACE will now support Google with market intelligence to detect predatory digital lending apps in India that are non-compliant with the Play Store’s policies and enable swift action against them.

“Google has taken commendable steps in this space and established a stringent policy framework to prevent bad actors (predatory digital lending apps),” said Sugandh Saxena, Chief Executive Officer (CEO) of FACE.

"This collaboration aims to strengthen user protection, emphasizing the importance of responsibility and ethics among stakeholders to drive positive change," said Souparno Bagchi, COO, Balancehero India.

Need for stricter industry standards for digital lending

The digital lending industry has been meeting a need that was left unaddressed by the traditional financial system in India. However, the digital lending space has been plagued with teething problems. One of these is the spread of fraudulent lending apps. This has hurt the perception of digital lending platforms in the eyes of borrowers.

“The need for strict industry standards arose when a number of digital lending players, especially those outside India, resorted to questionable practices and collections were brought to the forefront,” said Anil Pinapala, founder and Chief Executive Officer (CEO) of FlexPay by Vivifi, a non-banking financial company (NBFC). He added that they provided no proper disclosure to customers about the cost of credit and other terms of loan agreements.

But thanks to the guidelines laid down for digital lending, there is now a standardisation of disclosures, and customers clearly know the cost of borrowing. “We have a regulator who is forward-thinking and forward-looking and has provided a framework for the digital lending industry to build a sustainable growth path,” Pinapala said.

Collaboration helps borrowers

This collaboration between Google and FACE ensures that consumers have access to safe lending apps, and they can borrow with confidence knowing that they will not be exploited by fraudsters.

Sometimes fraudsters come up with products that seem quite similar to legitimate ones and even get these uploaded to the Google Play Store. To detect such players, FACE is constantly monitoring the app store on two parameters. First, they keep an eye on the new entrants and do their due diligence on these apps. Second, they observe the sudden rise or drop in the rating of any digital lending app.

“At FACE, when we detect signals that need further examination and a possible review, we pass them on to Google, and they then take the required action,” Saxena said.

According to Saxena, this exercise provides them with a lot of insights into the evolution of fraudsters and the way they try to fool the system and camouflage their patterns. "We use these learnings to improve our own monitoring and due diligence processes," Saxena said.

“We also hope that our request to examine the possibility of whitelisting apps will be accelerated, as that will enable consumers to identify apps that are properly regulated and have a good framework of guidance that they can interact with,” said Pinapala.

"Apart from the collective effort aimed at fostering a safe digital environment, the partnership is also dedicated to building awareness nationwide and establishing a digital resource hub with content available in up to 15 Indian languages,” said Madhusudan E, Co-founder and CEO, KreditBee, a digital lender.

Successes of FACE and Google

FACE has been monitoring the digital lending space in India, contributing to weeding out hundreds of predatory personal loan apps. In the last 15 months, FACE has reported over 700 dubious apps to app stores, regulators, and government authorities.

According to Google, it has consistently worked towards combating fraud caused by personal loan apps on Google Play by updating its policies and reviewing processes. In 2022, Google reviewed and took necessary enforcement action on more than 3,500 personal loan apps for violations of Play Store policy requirements in India.

This collaboration aids the goals of Google’s new safety initiative, DigiKavach, which aims to safeguard people from increasingly sophisticated financial scams wrought by online fraudsters by working with industry experts.