RBI has dealt a blow to loan apps hoarding customer data

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Editor's note: Stuck in traffic on the way to a meeting some time ago, I set up a call with the founder of a lending software company. What started off as a conversation on credit scores suddenly turned interesting when the person on the other end of the line started reeling out the list of variables his software collects on behalf of banks and other lenders.  Including tracking a mobile phone’s battery usage, time spent on apps like Instagram, LinkedIn and Gmail, sleeping hours and the time set by the user for their daily morning alarm, over 100 variables were being tracked by lenders that embedded his software tool. Based on this, the software would generate an alternative credit score which would feed into lenders’ internal credit score models.  I was reminded of this interaction while going through the Reserve Bank of India’s new guidelines on digital lending, published last week. We wrote about the guidelines, which follow a slew of regulatory actions in recent months aimed at beefing up know-your-customer norms among fintechs and tightening rules for those operating in the …