D91 Labs
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D91 Labs


#1 | Roundtable — Digital lending for MSMEs

with Khatabook, OK Credit & Razorpay

This roundtable was conducted as a part of ‘Future of data sharing’ sponsored by Facebook and attended by Khatabook, OK Credit, Razorpay. In this roundtable, we discussed the USP of digital lenders, the challenges faced by them, and how account aggregators can help solve the problem.

How might we create a trusted environment for users to share data and help them unlock potential features with respect to digital lending especially in MSMEs?

Lending through a digital platform, right from receipt of loan application to disbursement of loans, is known as digital lending. Digital lending gains momentum as a result of employing new technologies, new credit scoring algorithms and inclusive approach.

Why should digital lenders exist?

  • Banks still act as regulators, therefore there is very little innovation in lending. Digital lenders can understand regulations and actively innovate. A mixed model can be worked out between the two.
  • Banks and NBFCs struggle with distribution as they rely on very traditional data sources like bank statements. Digital lenders can facilitate underwriting with non-financial data, add intelligence and innovation on top of this data and help them distribute this. There could be a system of scoring users from the platform’s data.
  • Digital lenders have the ability to empower people who have no credit score/CIBIL score.
  • Digital lenders have the ability to bring down servicing costs. For a bank in the traditional model, the cost of acquiring and servicing a customer is very high. There is no lending without collections. The cost of collections is sometimes more than the interest. Digital lenders make repayments easier.

“My mattress is doing fine by keeping my money safe. Why should I be a part of the formal process?”

  • Digital lenders can improve and design an experience for people who have never had a bank account.
  • People will be able to avail microloans instead of relying on friends/relatives.
  • Digital lenders can connect banking with ledgers for MSMEs and address the mismatch of loan sizes for each MSME.
  • Digital lenders can provide customers with a 360-degree view of the lending options available for them.

Challenges in digital lending for MSMEs

Trust and Branding

“Will you share our data with the government?”

Mistrust: When people do KYC, a lot of times there is data duplicacy. These go into the hands of bad actors who create accounts, do some social engineering to get OTPs, and identity theft happens. This especially happens when one has large on-ground marketing teams.

Lack of transparency:
In most cases, the loan size offered is not up to the user’s expectations as lenders only have access to pockets of data.

How do we create those pockets of trust so that people are open to sharing their data to get to their goal?

  • Do we even need so much data for a ₹5000 loan? There is a need to build trust and understanding as a habit before implementing this.
  • Creating a relationship without having to do relationship management: The older model of having a relationship manager has a lot of pull. An agent explains a loan product a lot better, asks the customer if he’ll be able to pay for the next month. MFIs specialise in empathy. Fintech specializes in tech. What if both work together

What is the new design for a digital ‘relationship manager’?


According to the RBI’s rule, any digital lender/distributor should share the name of the lender with the customer on the app. A result of this is the confusion caused for the customer by distributor vs. lender information: E.g. Ola postpaid (distributor) transactions are listed as Aditya Birla(lender) in bank statements.

In situations where things don’t go right, the customer doesn’t know who is accountable for the issue? The bank, the distributor, or the lender. The customer may directly approach the lender instead of the distributor.

The challenge here is: Can the digital lender be the only consumer-facing entity who can solve their issues with regards to the lender as well?

Tech Literacy

What is the kind of practices that worked out that could be adopted for AA for getting KYC data?

The digital lending process can be enabled through WhatsApp to complete the flow. Though customers might not be able to upload and look for documents on their phones, they can seek help to do it. Further, supporting chatbots on WhatsApp will help companies to scale. WhatsApp is one of the most common communication channels that are used by the customers and it comes naturally to them. Also, asking questions on WhatsApp is easy for them compared to other app interfaces that are used less frequently.

Customers mostly know that they’re talking to a bot and they prefer to talk to a human compared to a chatbot. Chatbots can handle most of their questions and if not, they can be directed to an agent.

Big businesses think dynamically. Small businesses don’t. If digital lenders can show them what their needs are, they’ll take it.

Financial Literacy

Will customers be looking at a product and compare it with various digital lenders?

Customers tend to provide a large amount of data for higher loans compared to a smaller one, scrutinizing each and every line. The question is: should the importance of a loan product come from the difficulty of the process? The process difficult, not everybody has access to it.

We think that the importance of the action can be expressed through interactions that the user is going to take. For e.g. enter OTP, password.

Digital lenders are easily accessible but two contrasting perceptions exist around them. Users either get intimidated or do not take them seriously as relationship-based money movement still exists.

A lot of loan products are not treated as loans. They have a different tonality.

Data Privacy

Which data is more important and which is not? What is the user’s perception of data privacy?

In the case of an OTP, it is explicitly mentioned that one is not supposed to share it. People understand data privacy if it is mentioned very clearly in simple terms, but a lot of customers choose usability and convenience over data privacy right now. Privacy is not a value differentiator for the masses.

MSMEs are hesitant to provide bank details & KYC unless they know for sure that one is from the fintech company one is claiming to be from. Also, KYC completion is a huge challenge. Since the customers don’t have digital copies of documents, hand-holding is required.

With all these challenges in mind, we can say that adoption of AAs might take a lot of time — similar to the use case of a debit card, but once it happens, it using AAs will be second nature to them.


Future of Data Sharing:

‘Future of Data Sharing’ aims at designing a playbook for consented sharing to enable financial services in India. The objective of this research is to develop a design toolkit with the upcoming public infrastructure Account Aggregators as the main theme in focus. The toolkit will host resources and assets around designing better user experiences for data sharing and data portability.

Future of Data Sharing is sponsored by Facebook and executed in collaboration with D91 Labs, DICE, Parallel Labs and TTC Labs

Check out our Research Series

About D91 Labs

This research was executed and documented by D91 labs. D91 labs is an open-source initiative by setu.co to help Bharat build great fintech products. We organize and publish user research, insights, and frameworks for fintech in India. Please follow us on medium for more exciting stories and insights on Bharat.

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