Digital Lending and the Question of Trust
Digital Lending and the Question of Trust
In conversations with Indian lenders, one theme stands out: the struggle to keep KYC and underwriting both compliant and user-friendly. Lenders must prevent fraud, satisfy regulators, and still deliver a seamless customer experience.
India’s digital lending market has expanded rapidly, supported by Aadhaar, UPI, and a strong digital public infrastructure. Yet trust remains fragile. Borrowers hesitate when processes feel complicated or inconsistent, and lenders face rising fraud risks that damage both reputation and portfolio quality. Regulators are rightly raising the bar with new rules on KYC, underwriting processes due diligence, and consumer protection.
The challenge is not growth, but sustainable growth built on trust.
Why Trust Is Easily Lost
In semi-urban and rural markets, even small frictions create outsized damage. For example, a microfinance company in Eastern India can report that many first-time borrowers abandoned applications after multiple failed OTP attempts – not because of unwillingness, but because families often share SIM cards or devices. What looks like non-compliance is often a matter of access.
Such experiences undermine confidence. Customers see repeated KYC failures or unexplained declines and start questioning whether digital lending is truly safe. Dvara Research’s study Unpacking Customers’ Trust confirms what I often hear in the field: borrowers judge lenders not only on credit terms, but on the ease, fairness, and transparency of onboarding.
Device Intelligence: A Trust Enabler
This is where device intelligence makes a difference. Instead of adding new steps for borrowers, it quietly assesses the device and network environment to strengthen verification in the background.
- Stability signals: Is this a returning trusted device, a suspicious new one, or one that was involved in past malicious activity?
- Fraud detection: Are we seeing emulators, bots, or remote access tools?
- Behavioral confidence: Does this interaction look like a genuine customer, or an orchestrated fraud attempt?
Across South Asia, I’ve seen how this approach helps lenders distinguish between two critical cases: a shared household device used by a genuine family, and a device exploited by a fraud ring. The difference is subtle, but it determines whether credit is expanded to the underserved or siphoned away by bad actors.
Alignment With RBI and FACE Priorities
India’s regulatory direction is increasingly clear: trust in digital lending must be supported by risk-based, intelligence-driven controls, not static or purely procedural checks.
In early 2025, the Reserve Bank of India issued new guidance on payments security and authentication, with requirements taking effect by April 2026. The framework explicitly encourages a move beyond static OTP-based authentication toward risk-based authentication, where behavioural, device, and historical signals inform real-time decisions. This shift is driven by rising OTP compromise, phishing, and SIM-swap fraud across digital payments and lending.
In parallel, FACE – India’s RBI-recognised Self-Regulatory Organisation for FinTech lenders – has updated its codes of conduct, reinforcing expectations around borrower protection, transparency, and responsible use of alternative data in underwriting and fraud management.
FACE’s CEO, Sugandh Saxena, summarises this direction clearly in commentary shared with JuicyScore:
Her point reflects what many lenders on the ground already recognise: trust can be strengthened or lost in a single interaction. If verification is too rigid, borrowers drop off. If it is too lax, fraud escalates.
Device intelligence enables lenders to meet this higher bar – strengthening due diligence, reducing misuse of AePS, and protecting borrowers – without introducing friction. It aligns directly with RBI’s objectives on responsible KYC and with FACE’s mission to advance innovation and consumer protection together.
Impact of Device Intelligence on Borrowers and Industry
- For borrowers: Faster approvals, fewer false declines, and a stronger sense of safety in using digital credit.
- For lenders: Lower fraud losses, higher repayment reliability, and improved portfolio quality.
- For the industry: Greater credibility with both regulators and consumers, ensuring that growth is sustainable.
Looking Ahead
As digital credit expands deeper into semi-urban and rural India, trust will be the deciding factor. Customers who feel protected are more likely to embrace formal credit, repay responsibly, and recommend digital services to peers.
In my work with lenders across India, I am convinced that device intelligence is not a luxury but a necessity. It allows companies to comply with RBI and NPCI requirements, uphold FACE’s standards, and most importantly – deliver an onboarding experience that builds confidence instead of eroding it.
Conclusion
Safe digital lending is not just about meeting compliance checklists. It is about ensuring that every borrower – whether in a metro city or a rural town – feels secure, respected, and supported in their financial journey.
By adopting device intelligence, lenders can create seamless onboarding, strengthen fraud defenses, and reinforce the trust that underpins India’s digital financial ecosystem. In doing so, the industry can uphold FACE’s mission: building a fintech sector where innovation and consumer protection advance together.
