Digital Lending Industry ESG Thematic Report, 2023

Environment, Social and Governance in the Digital Lending Industry

The current trend of investments is impacted by the introduction of policies in areas of Environment, Social and Governance.

The inadequacy in the conventional banking system has impacted the rise of the digital lending industry. The key leaders of the industry have aimed at reducing the inadequacies that are in the conventional banking system, where financial transactions related lending take place with speed and efficiency.  However, the main challenge for the digital payments market in terms of ESG arises in the aspect of governance, since data protection and privacy remain a challenge.

The COVID-19 pandemic has led to a new increase in the usage of the digital lending methods, since the economy was impacted negatively, causing the consumers to further use such apps. The United Nations’ Sustainable Development Goals (UN SDGs) is a comprehensive framework that helps companies in this market obtain a perspective on the impact of their products and operations on ESG parameters.

ESG Trends

The impact of the pandemic on the digital lending industry, which led to steep inclination of usage of lending apps and the expansion of technology, which in turn makes the financial transaction contactless and the method efficient, has promoted the financial security amongst the users.

Another aspect of ESG that has been impacted is the environment. Lending through virtual mode has contributed to the reduction of carbon footprint to a larger scale, since the usage of logistics and energy consumption from the infrastructure will come down, positively impacting the environment, promoting the UN SDG 9, which is industry, innovation and infrastructure.

However, contrary to the positive aspects, there are certain challenges to the market in terms of ESG to the market, in the form of data privacy and consumer protection, which impact the social and governance sphere of ESG. It must be noted that the industry, unlike the conventional lending market, is relatively new and a lot of areas such as data protection and privacy and consumer protection must be worked on.

Due to this, one of the governing bodies of the Indian economy, has issued guidelines, impacting the governance aspect of the industry, essentially regulating the digital payments market, pertaining to the Indian economy.

Further to avoid the imbalance in the lending contract, the institution has mandated the companies of the Indian digital payments market to issue a Key Fact Statement as to give the borrower or the user, which shall contain the information related to the terms and conditions of the contract and the costs of the digital loans, along with the mode of recovery of the asset.

In order to regulate the data privacy, the governing body has ordered the companies of the market that operate in the Indian jurisdiction, to collect data only with the express authorization of the user or borrower and not to access the media files, camera and other applications that infringe the privacy of the consumer, impacting the governance sphere of the digital lending industry., promoting the UNSDG goal of institutions for peace and justice (SDG16).

Growth of the Digital Lending Market

The digital lending market was valued at USD 5.84 billion as of 2021 and is forecasted to expand with a CAGR (compound annual growth rate) of 25.9% from 2022 to 2030. Pertaining to the Indian Economy, the market is primarily supervised by the regulating authorities, which impact the governance aspect of the digital lending market.

Key Companies in this theme

    • Ellie Mae, Inc.

    • FIS; Fiserv, Inc.

    • Newgen Software

    • Nucleus Software

Scope of the Digital Lending Industry ESG Thematic Report

    • Macro-economic and ESG-variable analysis of the industry, including regulatory, policy, and innovation landscape

    • Key insights on infrastructure developments and ESG issues affecting the theme

    • Identify key initiatives and challenges within the industry

    • Identify ESG leaders within the industry

    • Understand key initiatives and the impact of companies within the sector to fuel an informed decision-making process

    • Analysis of industry activities based on multi-media sources, including significant controversies and market sentiment

Key Aspects of the Digital Lending Industry ESG Thematic Report

    • Offers a global perspective of the digital lending industry and the policies and measures taken by the players, for overcoming the challenges faced in terms of Environment, Social and Governance.

    • Key insights into the sustainability practices of major players in the market.