Taking a loan is bittersweet. While there is someone to bail you out in time of need, the paperwork for getting a loan approval is a drag. There is a whole machinery involved, and it is far from efficient. The documents go to the lender’s back-office for processing. The details are entered manually on a spreadsheet, leaving room for clerical errors. Then, spreadsheets are computed. Finally, a credit team judges your creditworthiness. It can take anywhere between three days to several weeks before a loan is sanctioned. But there is a class of companies called ‘account aggregators’ –AAs–that digitise this process, reducing it to a few minutes, or hours for a complex job.
But if it’s so easy why haven’t more banks adopted the digital route? Because instant approvals come with risks.
In fact, it is a wonder that a full-blown security disaster hasn’t happened as yet. Perfios says it is India’s largest online AA and it took a maverick road—riding with no stamp of approval for its ways. On the face of it, the business runs like that of a valuable fintech service provider. Perfios assesses the creditworthiness of loan seekers by scouring bank statements to create an intelligent report for the lender. It also has a personal finance management tool that lets users see all their financial relationships in one place. Pretty nifty if you have relationships with many different financial institutions.
Both services –quickening loan issues with fewer people involved, and a personal finance management product for borrowers– are good to have. But the manner in which companies such as Perfios collect data has made some banks and consumers reluctant to use them.
AAs take the client’s user and password details and access their bank accounts, and if that isn’t discomfiting enough, they create duplicate screens in a software-assisted process called ‘screen scraping’, which is internationally deemed unsafe. The company says it takes security precautions by encrypting data and runs a two-page disclaimer asking the user’s consent for accessing their bank statements. More on this later.
Rahul Sasi, co-founder of Bengaluru-based cyber security startup, CloudSek, says third-party companies are particularly vulnerable to threats. “For hackers, this is like an open invitation to make a breach as they usually target third-party vendors, rather than the main entity.”
In July, Italy’s biggest bank UniCredit saw a data breach where hackers accessed 400,000 customers’ personal data. While no money was reportedly lost, details stored at the time of taking loans such as the names, addresses and bank card numbers of borrowers were stolen. And the bank squarely blamed third party providers for the breach.
So far, Perfios claims it has had no data breach. The security risks, along with the fact that building such a product needs deep customisation to be compatible with every financial institution has meant that few companies exist in this space.
