JioPhone Next Can Unleash a Credit Revolution Across the Globe With Its Low Price Point
A smartphone that is widely believed to be under $50 (about Rs 3,650), possibly the cheapest in the world, will start selling a week from now. If Mukesh Ambani’s JioPhone Next, an Android device designed specifically for India by Alphabet’s Google for India, succeeds in the price-conscious market, it will solve a problem for banks while posing a problem. is different. With the country’s remaining 300 million feature phone users online, there’s a huge amount of customer data that can be collateralized. The question is how will banks get involved in that?
The answer has come from iSPIRT, a small group of policy influencers that are quietly setting technology standards for India’s digital markets, encouraging companies to enter the cyber markets. New openings from online payments to healthcare.
The Bangalore-based team is championing a new group of players – account aggregators – to unlock a much-coveted prize: Bringing official credits to 80% of adults in developing countries developed (40% in rich countries). t borrow money from traditional institutions.
But these people and their micro businesses are increasingly online thanks to innovations like JioPhone Next. They are paying rent, rates and utility bills and receiving payments on their smartphones, dispersing their footprints across the Internet. Account aggregators will collect those digital scraps for people to share their own data in a machine-readable format for bank loan applications.
Introducing a consent manager class is important. Emerging market borrowers can have a variety of account-based relationships. However, they can become useless for banks if they cannot present an aggregate picture of their financial lives to access formal loans supervised by credit bureaus. More than three-fifths of India’s adult population is either invisible to credit scorers or not considered difficult by standard lending institutions.
In an advanced economy like the United States, services like Experian Boost and LenddoScore help close the visibility gap of subprime borrowers by getting them to voluntarily submit utility bills or play videos to demonstrate how well they’re doing. trust. But in an emerging market with low levels of financial literacy, banks would rather leave the bottom of the pyramid for lenders to know the borrower in real life or have some social leverage over her. such as microfinance firms that lend to groups of women.
In contrast, technology platforms, acutely aware of customers’ online behavior, can match them with loans, collecting fees while leaving the bank at risk. Jack Ma’s Ant piled up nearly a fifth of China’s short-term consumer debt before Beijing left the game.
Not every country can afford to deploy heavy artillery against its private sector: Politics doesn’t allow it. Aggregation tools could be a much gentler tool to keep lending markets fair, giving banks a fair economic opportunity to compete with data-rich tech giants .
Take the next JioPhone. It will provide data on a large portion of the sparse banking population. Jio, Ambani’s 4G telecommunications network, will get a slice of that as subscribers to its low-cost data plans buy groceries from JioMart, an online partner with neighborhood stores across India. Degree. Google will also receive valuable data about the user’s location and search queries. Facebook will tap into its own knowledge, as the social media giant adds half a billion powerful Indian customers to WhatsApp and the craze grows for Instagram Reels, a video-sharing platform . It’s no surprise that Google wants to influence India’s deposit market, and Facebook is targeting the small business lending pie.
When it comes to real-time data, banks can never match the influence of platforms. But a snapshot of the account aggregator can help them catch up with the times.
Just enough additional data will tell them whether a customer is more reliable than suggested because a low (or not) credit score can make a big difference in profitability, especially when banks will don’t have to pay huge fees to people like Jio, Google or Facebook for their exclusive reviews. By explicitly owning and sharing their data, customers avoid being trapped in the tech industry’s biased algorithms. Small businesses will be able to show their cash flow to lenders by aggregating everything from tax payments to customer receipts. Once telcos join in, an affordable “buy now pay later” plan for refrigerators will become possible for a low-income family paying regular phone calls.
Aggregation, as a utility, will be like tap water to Evian’s platforms, and priced accordingly. Who will own the pipes? Walmar’s PhonePe, which operates India’s most popular digital wallet, has received in-principle approval to become an aggregation company from the central bank. Eight banks, which account for 48% of all accounts in the country, have agreed to use the framework, which went into effect on Thursday.
That is a good start. Banks desperately need help to continue the money game. Or they will just cry to the regulators and ask them to take special protections against Big Tech. That would hurt the testing process and delay the credit revolution that $50 phones (about Rs 3,650) could unleash.
© 2021 Bloomberg LP
