Acquisition and cross-selling activities rely heavily on data reuse and thus are much less consistent due to their nature. These will probably become those processes, which are going to change. The recovery process poses some threats due to the coercive nature of the latter, which is based on the contact data.
Digital lending, for ten years, has operated on a straight forward trade-off. The borrower clicks ‘accept’, and the lender gets access to his or her life, from their contact details to location and everything about them in relation to how they behave when on the phone. This has made credit decision-making easier and reduced the cost of sourcing for new customers while providing access to their next offering. The trade-off is currently undergoing a revision. Five principles have been established by DPDP regarding personal data which include need-based collection, consent, etc.
This poses two issues that cut right to the core of the issue. Is consumer data becoming a competitive advantage that is inadequately regulated in digital lending? In the event that these can leverage consumer data for better underwriting, cross-selling, and acquiring new customers, where do we draw the distinction between credit intelligence and data monetization? The second one has more to do with the business side of things. Would stricter regulations on data collection, pricing and recovery alter the economics of digital lending, especially with regards to what part of the business depends on consumer data?
Strong rules, a weaker perimeter
In theory, there are plenty of safeguards. “There are safeguards, especially when the loan app is linked to a RBI-regulated bank/NBFC,” Ekta Rai, Advocate, Delhi High Court, tells ThePrint. She notes that there are constraints placed by RBI’s guidelines on accessing data like the contact list and call logs, and the DPDP Act has ensured that consent has to be specific and limited to the data required for the purpose.
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The problem, however, is something else entirely. “The real problem is enforcement and the regulatory perimeter,” she says, noting that consumers are usually unaware of who the real lender is, as well as whether or not the app is operating inside the regulated sphere. The more accurate observation is that although the regulation is regulating the lender, the consumer is encountering the whole credit ecosystem.
Soumya Singh, Co-Founding Partner, Thistle&Law, describes the same gap from the enforcement side. India has guardrails through RBI’s digital-lending framework, the DPDP regime and the IT Act, she notes, but enforcement becomes difficult where an app sits outside a clearly regulated lending structure or operates through layered partners. Those partners are typically lending service providers, the technology and collection intermediaries that work between the borrower and the balance sheet. The regulatory gap, she argues, lies in real-time supervision of smaller apps, clearer accountability between lenders and their service providers, and faster takedown of illegal loan apps.
This is where the line between credit intelligence and data monetisation begins to take shape. Singh’s position is unambiguous. “Consent cannot become a defence for collecting contacts, photos, location data or behavioural information that is not necessary for assessing or servicing a loan,” she says. “A borrower may agree to a loan, but that does not mean they have agreed to harassment, data resale, dark-pattern consent or coercive recovery.”
The dark pattern represents those elements in the user interface design that encourage the user to click “accept” without comprehending the terms he or she is agreeing to. With purpose limitation, the information that is obtained in order to determine whether a loan is needed cannot sneak into the information used for marketing engines or resold as a commodity. This is the crucial change for the marketers and advertising professionals. Information collected broadly and used loosely has to be limited to its purpose and protected by the entity responsible for it.
What it means for unit economics
Applying these guidelines to the case at hand, one can conclude that there are some discrepancies when it comes to the use of data by the fintech model. The underwriting process, which is the analysis of the ability of the borrower to pay back, is based on need-based information and remains consistent, as the lender always has justification for its use. Acquisition and cross-selling activities rely heavily on data reuse and thus are much less consistent due to their nature. These will probably become those processes, which are going to change. The recovery process poses some threats due to the coercive nature of the latter, which is based on the contact data.
The more constructive reading is that discipline may become the new differentiator. Rai argues that RBI already requires regulated lenders to assess creditworthiness and provides a cooling-off period for digital loans, but that responsible lending must go beyond disclosure. “A borrower may understand the interest rate and still be in no position to service another loan,” she says.
The test she proposes is whether the lender has taken reasonable steps to ensure additional borrowing is affordable, especially where there are multiple small-ticket digital loans. She wants the framework to focus on aggregate indebtedness, affordability and repeat borrowing rather than treating each loan as an isolated transaction. Lenders that build real-time checks of a borrower’s existing digital-credit exposure would, in effect, be using data to reduce risk rather than to extend reach, which is the legitimate end of the spectrum.
A verified market is a trusted market
Both experts sketch what the next phase could look like. Rai wants a clear “true cost of credit” shown before a borrower accepts, covering how much they receive, how much they will repay and by when, in simple rupee terms. She also wants the identity of the actual regulated lender to be impossible to miss at the point of download and application. RBI’s new Digital Lending App directory is a useful step, she says, but protection will be stronger when verification becomes part of the digital lending experience itself, rather than something the consumer must undertake separately.
The agenda of Singh is a complementary one. She advocates for the creation of a verified registry for lending apps, stringent data-minimization audits, standardized cost disclosures, and a strict liability framework for the lender of record for the digital partners.
The trend from a strategy perspective highlights that data is not being stripped away; it’s being asked to prove its worth. The lenders and partner brands who build consent into their design philosophy and practice transparency around pricing will find that they gather what they need and make good on their word to their partners, and that a verified market is also a trustworthy one. In an industry where customers can’t always tell who is lending to them, this might just turn out to be their greatest strength.
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First Published onSeptember 25, 2026, 08:56:02 IST
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