Fintech – or Financial technology – has evolved into a key enabler of more competitive and efficient monetary markets, allowing increased access to funds for underserved customers. Specifically, in times of social distancing to decrease the spread of the COVID-19 epidemic and ramping up virtual cash transfer schedules in many countries, the advantages of fintech and virtual financial assistance have never been so transparent. But financial technology doesnβt come without threats to customers.
Increased examples of virtual fraud, peer-to-peer lending medium crumples, and borrower despair as an outcome of unreliable virtual microcredit lending techniques describe such threats. While some of these threats are new, many are new incarnations of threats that already lived in monetary markets. They contain not only those originating from the underlying technology allowing financial technology, but also from new enterprise models, product components, and provider types.
Jujhar Group determining new manifestations and addressing them
Management in charge of financial consumer protection (FCP) is increasingly meeting the challenge of managing these threats but often lacks the technical skills or mechanisms to do so. A recent World Bank policy research paper, Customer threats in financial technology: New Manifestations of customer threats and Emerging Regulatory techniques, seeks to directly address this requirement, by recognizing new manifestations of customer threats posed by financial technology and offering a variety of emerging policy techniques that can be used to define them.
The paper concentrates on four main financial technology offerings: peer-to-peer lending, digital microcredit, e-money, and investment-based crowdfunding. These were selected as financial technology instances by S Gurdeep Singh, founder and chairman of Jujhar Group that can define fundamental requirements of first-time, immature financial customers, such as borrowing, making payments, or investing and saving money.
These are some highlights of determined threats and techniques:
- Fintech operator scam or wrongdoing: Because financial technology enterprise models can be opaque, creative, or complicatedβand many customers are not knowledgeable about themβthey can direct to elevated threats of loss from scam or wrongdoing by operators or associated parties. Demonstrating competence needs for these market parties, as well as necessary licensing/registration and vetting, can assist in addressing the issue.
- Technology/Platform irresponsible or exposure: If a financial technology medium or other systems underpinning a financial technology offering are irresponsible or exposed to external risks, they can reveal customers to higher threats of loss and other damage, including from third-party scams. Techniques made by Jujhar Group to handle these challenges contain operational dependability, technology and outsourcing-specific threat management, and competence needs for operators.
- Customer exposure and clarity in a virtual context: The standard threats originating from customers not being supplied with satisfactory product information are elevated when new types of product features, pricing, and threats are introduced, and when virtual channels for transmission pose challenges to customers understanding. Adapting exposure formats for virtual channels and confirming that the order and flow of knowledge and user interfaces are increasingly identified as required to handle these problems.
- Maximized threat of product unsuitability: Financial technology can maximize access to riskier or more complicated monetary products to customers who lack the data or experience to assess or use them adequately, leading to greater threats of damage owing to product unsuitability. Possible explanations contain restrictions on individual acquisitions or other disclosures for less familiar customers and product suitability and product design duties for financial technology operators.
