WHILE EFFORTS are on to lay down the framework for protection, privacy and security of data generated by millions of internet users in India, work is also underway to enable citizens to leverage their data for various uses, including to access credit.
To this effect, the Telecom Regulatory Authority of India (Trai), which issued its recommendations on privacy, security and ownership of data in the telecom sector on July 16, has called for setting up an electronic consent-based mechanism for telecom users to allow use of their data.
Analysts predict that the use of alternate data sets like telecom usage patterns could power a credit boom among the self-employed and low-income population groups that have no credit history to offer other than data on their spending habits maintained by service providers such as telecom companies.
“We are suggesting that a data fiduciary be created for the telecom sector. It is necessary that a user can use his or her data apart from being able to protect it. For that, there has to be a framework — not necessarily a paper-based framework — and it should be online and seamless. In some African countries, data pertaining to mobile recharges and bill payments is being used by people to establish their credibility and take loans. If I am paying my bills regularly, it establishes my bona fides,” Trai Chairman R S Sharma told The Indian Express.
However, data pertaining to timely payments of telephone bills may be available only in the case of postpaid users, who comprise just five per cent of the 1.06-billion strong mobile subscriber base in the country.
The proposal to create a data fiduciary for the telecom sector follows a similar move from the Reserve Bank of India, which, in 2016, laid down guidelines for account aggregators for non-banking financial companies.
“After obtaining the consent of customers electronically, (the account aggregator) collects the information from providers of information based on the standardised consent artifact and securely transmits the same to users of the information. This direction is for the benefit of financial sector consumers, as it empowers them to use their personal data, in the form of financial transactions history, for availing new services from any other competing service provider,” TRAI said in the analysis of its recommendations.
The Boston Consulting Group, in a report released this month, pointed out that software products think-tank body iSPIRT has created a Data Empowerment and Protection Architecture to allow users to decide what data they want to share with different entities. Explaining the RBI’s guidelines, the report said: “This framework, inspired by Scandinavian countries where trust in government’s data security mechanisms has led to the widespread availability of consumer data, is likely to go live soon.”
BCG estimates that digital lending business is expected to rise five times over the next five years to $1 trillion. Norwegian telecom firm Telenor has introduced predictive credit-scoring models, which are used for mobile money loans, apart from emergency top-ups and financing of handsets.
The concept of utilising telecom data to access credit has also been put to practice in developing economies such as Latin America and Africa, where a number of start-ups are working with credit scoring companies such as Equifax, in partnership with telecom companies, to create ratings for individuals based on their cellphone usage.
TRAI, however, noted that it may work on such a framework for the telecom sector only after the guiding principles for data privacy and security are approved by the government. Further, it advised that the architecture should be such that it allows users to revoke their consent in the future, if they wish to.
The recommendations by TRAI on “data empowerment” fall under the broader concept of what is defined by a section of the technology industry as “India Two” — 100 million families that have an annual household income between Rs 2 and 5.5 lakh.