Digital lending players and fintech associations have cheered the new stricter norms rolled out by Google for applications on its Play Store, even as they fear a rise in their customer acquisition costs in the near term.

Google has introduced a new policy for personal loans, wherein all players listed on its store will have to either furnish their lending licence as given by the RBI, or furnish details of their lending agreement if it is a third-party fintech in partnership with another lender.

“The new Personal Loan Policy restricts digital lending apps from getting access to customers’ storage, contacts, location history, phone numbers, photographs or videos; thereby safeguarding the borrower’s privacy and promoting good financial practices,” said Mahesh Shukla, CEO and Founder of digital lender PayMe. “The move will create more a more level playing field for digital lenders who operate with transparency and fairness,” he added.

Players have also been asked to disclose information such as minimum and maximum repayments tenures, interest rates, and other charges.

Based on RBI norms

The policy being rolled out from Wednesday, is based on the digital lending framework prescribed by the Reserve Bank of India (RBI) and comes after the government and regulator asked Google to help introduce more stringent checks to curb the use of illegal lending applications. Google has been making changes and modifications to its digital lending policy since September 2022.

“Our work in monitoring hundreds of dubious lending apps informs us that illegal and fraudulent apps were taking such access as their business model relied on exploiting customers using their contacts and pictures,” said Sugandh Saxena, CEO of FACE (Fintech Association for Consumer Empowerment).

The expectation is that the enforcement of new rules will dissuade such illegal apps, she said, adding that FACE will however continue to monitor such activity and be watchful as frauds may evolve in some other shape or form despite the stricter gatekeeping.

Fintech impact

The new guidelines are completely dependent on Google, which in its authority will verify if every player has requisite licences and documentation, industry players said. They added that the idea is to regulate the space to ensure only verified and legitimate businesses remain, but it will result in some short-term operational disruptions such as with respect to tracking customer clusters and syndicated loans.

“It could affect NPAs because now we don’t have more information about customers before giving loans. They also can’t upload Aadhar images and we will have to do live verification of Aadhar. So the cost for business will increase in terms of acquisition and conversion, not compliance,” said Ajay Chaurasia, Vice President — Marketing, Product and Business at RupeeRedee.

While lack of data will definitely be an issue, the guidelines will bring in more clarity in terms of the areas where digital lenders can operate and ensure that only serious players stick around, he said, adding that the process to upload and approve the required documentation only took about two days for the company.

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