MOBILE MONEY

Digital money lenders accused of breaching data privacy

In Summary

•A recent report by the Kenya Bankers Association said that digital lenders are found to be exploiting “insider information” about the borrowers.

Tala app, an online financial micro-lending platform, a mobile phone in this photo illustration
Tala app, an online financial micro-lending platform, a mobile phone in this photo illustration
Image: REUTERS

Mobile money customers have complained over hostile treatment during debt recovery by digital lenders, according to a report by a customer experience firm.

“In a bid to recover debts, some lenders access information from their customer’s contact list prompting their contacts to push the loanee to clear their debt without their customer’s consent,” the report said.

An act which they feel is a breach of privacy.

Ajua, which carried out the survey uses a technology that integrates businesses and their customers to measure and optimise their customer experience.

 

A recent report by the Kenya Bankers Association said that digital lenders are found to be exploiting  borrowers “insider information”.

The Data Protection Bill which was signed into law by President Uhuru Kenyatta in November 2019 aimed at regulating the processing of personal data and information.

It stipulates that illegal processing of personal data is punishable by law.

Digital money lenders should therefore be compliant to the set regulations.

In 2017, Financial Sector Deepening Kenya reported that majority of Kenyans access digital credit for business purposes such as investing and paying salaries, and to meet everyday household needs.

KBA reported that high interest rates applied by the various lenders reduces household incomes, while borrowers are likely to be pushed into distress.

They also indicated that borrowers who access digital loans are hardly aware of the costs, while the lenders are doing little to educate them.

 

Despite digital credit being easy to access it exacerbates debt distress, especially when credit is used for non-productive purposes,” the report said.

Ajua concluded in their report that methods of debt recovery such as intrusive calls and aggressively texting loanees multiple times in a day are ineffective and unsustainable for lenders as such tactics often lead to a high churn rate and loss of revenue in the process.

According to the 2019 FinAcess Household Survey, mobile money usage has grown from 27.9 percent to 79.4 percent in the last decade compared to a growth of 26 percent in traditional banks usage over the last 13 years.