Most regulators do not see digital lending as high risk
The vast majority of financial regulators globally do not see digital lending as high risk for consumers, new research has found.
The 3rd Global Fintech Regulator Survey from the Cambridge Centre for Alternative Finance (CCAF) and the World Bank found that just eight per cent of respondents deemed digital lending to be “very high” risk and 19 per cent said it was “high” risk, compared to 31 per cent who thought it presented a “low” or “very low” risk for consumers.
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24 per cent saw digital lending as a “medium” consumer risk, while 18 per cent were unsure.
Digital assets and cryptocurrencies were seen as far more risky to consumers, with 57 per cent of authorities saying they were “high” or “very high” risk.
While the regulators’ perception of consumer risk in digital lending was low compared to cryptocurrency, the most common area of concern was around unsuitable or unfair practices.
33 per cent said this was a “high” or “very high” risk, compared to 20 per cent who said it was “low” or “very low” risk to consumers.
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20 per cent of financial authorities said that the risk of loss for P2P lenders was “high” or “very high”, compared to 18 per cent who said it was “low” or “very low”.
Lack of transparency was cited as a “high” or “very high” risk by 31 per cent of respondents.
“Interestingly, the percentage of respondents who are unsure about the severity of risks in digital lending is higher than in the other verticals (except equity crowdfunding and digital capital raising),” the report said. “This suggests there may be data gaps or other challenges that need to be addressed to support financial authorities in their efforts to appropriately identify, prioritise and mitigate risks in this vertical.”
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Between April and July 2022, the joint CCAF and World Bank research team surveyed 128 financial authorities from 106 jurisdictions. Survey respondents came from authorities in East Asia Pacific (21), Europe and Central Asia (28), Latin America and the Caribbean (24), Middle East and North Africa (14), North America (3), South Asia (6), and sub-Saharan Africa (32).
“This comprehensive dataset offers a unique view into the world of fintech regulators and their respective institutions at a time of rapid changes in digital financial services globally,” said Bryan Zhang, co-founder and executive director of the CCAF. “We hope that the data and insights generated from this global survey will inform the work and practice of fintech regulators, supervisors and policymakers, help them benchmark responses, frameworks and activities, and facilitate meaningful peer learning and knowledge exchange.”