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Indian consumers still falling prey to unlawful loan applications: Report

The RBI has issued a cautionary note related to the fraud to KYC (Know Your Customer) updation - they have further advised against sharing KYC documents or copies with unfamiliar individuals or organizations.

Edited By: Saumya Nigam @snigam04 New Delhi Published on: April 16, 2024 13:46 IST
Loan app, loan app fraud
Image Source : PIXABAY Loan app fraud

One-third of the high-confidence customers have limited knowledge about their digital loans in India. They lack the understanding of how to detect illegal lending apps, a report finds out on Tuesday.

A recent report from the Fintech Association for Consumer Empowerment (FACE) shared the insights from a customer survey which was conducted between December 2023 and January 2024 to systematically understand the gaps in users' approaches and knowledge about Digital Lending Applications (DLAs) in India and it further drives action to address them.

Almost every customer knows the lender's name, but less than a third know about the key fact statement and grievance redressal mechanism.

It was further reported that more than 57 per cent of the respondents reported about checking the loan app's affiliation with NBFC or Bank as the most crucial verification factor. On the other hand, 55 per cent said that they consider reviews and ratings.

Over three-fourths of the users noted that they ignore downloads and data-sharing metrics when deciding about lending apps.

Sugandh Saxena, CEO at FACE said, "Unscrupulous players hit the very core of the market, that is, customer trust for digital loans, harming customers and damaging the reputation of responsible digital lenders. We note that users are aware of downloading apps from the Play Store and checking the app's partnership with NBFCs/Banks, ratings, and reviews.”

She further added, "However, the study informs us about significant gaps in the customer tool kit and behavioural biases, making them vulnerable to being tricked by illegal loan apps. As we work towards a safe loan app ecosystem for customers, the insights from the report will inform our effective actions to focus on aspects that customers overlook and break behavioural disposition.”

Furthermore, the report showcased that digital marketing through social media platforms such as Instagram, Facebook, and YouTube triggers purchases, followed by word of mouth and product ratings. However, female users showed slightly better awareness of the loan product, the report said.

The Reserve Bank RBI cautions against fraud in the name of KYC updation. It advises against sharing KYC documents or copies of KYC documents with unknown or unidentified individuals or organisations. Earlier, Google suspended or removed over 2,500 fraudulent loan apps from its Play Store between April 2021 and July 2022.

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Inputs from IANS

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