Under stress due to cash-flow disruptions caused by the pandemic prompted lockdown, digital lenders are having to adapt their credit models to changing dynamics. Yet, in adversity emerges opportunity- due to social distancing becoming the ‘new normal’, digitized and contactless lending lifecycles will be vital to plugging demand in a credit-starved economy. Uday Somayajula, Co-founder, ePayLater joined Aparajita Srivastava and Vijayant Singh of Ikigai Law to discuss some of these challenges and opportunities in the digital lending sector.

The discussion can be found here.

To start with, Uday walked us through the recent changes in the digital lending market due to COVID. Laying special emphasis on changing risk assessment and underwriting models, the conversation later steered towards understanding the impact of lesser consumer spending on digital lenders. The discussion also touched upon a range of other issues, including plugging credit MSME credit voids, addressing issues in loan recovery and collection, tackling AI bias in underwriting, and privacy concerns arising out usage of ‘alternative data’ for building credit scores.

Key issues discussed:

1. History and development of ePayLater (01:35)
2. Macro impact of COVID on digital lending (09:46)
3. Changes in underwriting and risk assessment, especially in post-pandemic India (13:02)
4. Using data to create risk indicators and other future use-cases (23:05)
5. Financial inclusion and access to credit for new-to-credit customers (27:20)
6. The dip in consumer spending and its impact on microlenders (32:48)
7. Access to credit for MSMEs for post-COVID economic recovery (37:19)
8. Recalibrating risk models post COVID (42:00)  
9. Permanent risk models to account for black swan events such as COVID (48:28)
10. The use of AI in risk modelling and mitigating issues of AI bias (49:53)
11. Privacy concerns in the use of alternative data for risk modelling (51:55)
12. Sharing of financial data for risk modelling and underwriting (53:55)

To discuss, please reach out to us at contact@ikigailaw.com