This project studies how borrowers place trust in digital lenders in the rapidly expanding digital credit ecosystem in India. In 2021, India had nearly 1,100 unique loan apps across various platforms. However, more than half of these were found to be illegal – they operated without proper licensing, promised quick loans without paperwork at questionable terms such as exorbitant interest rates, hidden fees, and used unethical, coercive recovery methods. These practices are in stark contrast with the customer protection guidance prescribed by the regulator to regulated lenders.
The project enquires into two questions: what are the expectations that prospective borrowers have of trustworthy lenders and, how borrowers gauge the trustworthiness of a lender. We design a primary study to understand how customers trust and contract with a digital lender. Our study of trust relies on exploring the proximate grounds that people rely on to trust someone or something. We commenced a mixed-methods study of digital financial services’ users in early 2024. The study is supported by qualitative interviews spanning a range of topics from what trust meant in personal relations and financial transactions to the obligations that come with being considered trustworthy. This is complemented by an experiment where respondents assess the user interfaces of digital lending apps for trustworthiness.
Based on our discussions with users, we develop a theory to explain the making of trust in digital lending. A short video summarising the findings is available here; the foundational research on the psychological and affective dimensions of trust is available here and here.
