FINTECH ALLIANCE PH is planning to launch a data-sharing initiative next year among industry players that focuses on monitoring borrowing behavior and possible fraudulent activity in real time as online lending platforms (OLPs) continue to gain traction.
“There is no intelligence sharing yet. In fact, we are now in serious discussions about that in the industry. Of course, we want to start with the big players, especially GCash or Maya, because they’re also into lending, and then eventually, the banks,” FinTech Alliance.PH Chairman and Rizal Commercial Banking Corp. Executive Vice-President and Chief Innovation and Inclusion Officer Angelito “Lito” M. Villanueva told reporters on the sidelines of an event last week.
“Until now, there’s no such mechanism. That’s why, as an industry,… it has to have industry-led fraud intelligence sharing and also being able to detect real time. ‘Is this the same person who applied to me? At this very second, he’s applying with us.’”
The group is looking to pilot the initiative with five players and is eyeing to come up with a final framework by 2028.
This will help protect both online lenders and the borrowing public as it will help manage risks faced by the industry such as high default rates, he said.
“We’ve been telling SEC (Securities and Exchange Commission) that there’s still no mechanism by which we can detect, for example, a Juan dela Cruz applying with 10 mobile apps or 10 online lending apps simultaneously,” Mr. Villanueva said.
“There’s no way to detect whether who is applying with the 10 online lending apps and what if out of the 10, six approve you? So, the problem starts now when the borrower is overextended or overleveraged and can no longer repay the amortization… So, that’s where the problem is. I will now default on my payments. So, that’s why we have to protect the industry.”
With these high-risk borrowers being made up of many new-to-credit individuals, existing credit information sharing rules may not be enough to monitor potentially risky borrowing behavior, he said.
“You just see your credit score, but you don’t know who is applying to you, because the credit information comes after the fact… But in real time, you won’t see who is applying.”
Mr. Villanueva said establishing an intelligence-sharing framework is essential, especially rules on data access and reciprocity, so that companies will be encouraged to join. “You don’t want to share your good customers, but you want to share with your bad customers… Of course, there’s competition, right? You don’t want to share the information because what if they pay back their loans on time?”
This can also improve fraud monitoring, he added.
“There are quite a few countries doing this. But it has to be proactive… There are a lot of these emerging technologies that could be used for good, but the thing is, the bad actors can utilize it much faster than industry. So, the ultimate loser would be the customers. Even in this regime of deepfakes and social engineering, the poor customer wouldn’t be able to have that knowledge or that expertise to even distinguish what is true and what is not.”
This will go hand in hand with ongoing efforts to protect consumers from predatory lending practices, Mr. Villanueva said, citing the SEC’s draft circular proposing to cap the interest rates and fees charged by OLPs.
“The whole idea is how to protect our consumers. And in fact, for FinTech Alliance, we already expelled at least four online lending companies for unethical collection practices.” — A.M.C. Sy
