SECP issues whitelist of digital lending apps to prevent online fraud

ISLAMABAD: The Securities and Exchange Commission of Pakistan (SECP) on Wednesday released a whitelist of digital lending apps, which will serve as a reference for Google to list them on Play Store from May 31, in order to prevent online fraud.

The SECP has published the name of SmartQarza as the approved app, and it is currently evaluating three other apps for final endorsement. A statement of the regulatory body said the issue of online fraud through unauthorized apps offering personal loan and investment was taken up by the Pakistani authorities with Google who urged the global internet company not to allow such apps to function in Pakistan.

“The list will be updated as and when an app gets approved or rejected by SECP,” the statement said. The regulator has identified and shared a list of 75 illegal apps on the Play Store. The SECP has made it mandatory for apps to obtain cybersecurity certification from any firm approved by the Pakistan Telecommunications Authority (PTA), proving that they do not access customers’ personal data.

The SECP whitelist contains the names of approved apps owned by licensed Non-Banking Financial Companies (NBFCs), as well as the apps of licensed NBFCs that were operating as of December 27, 2022, and have applied for approval.

Pakistani law also mandates these apps to comply with digital lending standards, take adequate cybersecurity measures and controls to ensure confidentiality, and restrict them from accessing the user’s phone book or photo gallery.

Pakistan has become the sixth country, after India, Indonesia, Philippines, Nigeria, and Kenya, to introduce additional conditions for digital loan offering apps. According to the regulator, the whitelist contains the names of approved apps owned by licensed non-banking financial companies (NBFCs), as well as the apps of licensed NBFCs which were operating as on December 27, 2022 and have applied for approval.

"Cyber security certification from a PTA approved firm, certifying that the apps don’t get access to customers personal data." SECP urged all NBFCs engaged in digital lending activities to comply with the updated requirements specified in Circular 15 and submit requisite documentation for app approval at earliest to avoid any inconvenience.

Circular 15 mandates compliance with digital lending standards, inter-alia the placement of adequate cybersecurity measures and controls to ensure confidentiality, integrity and the restriction from accessing borrowers’ phone books or photo galleries.

The move by SECP is aimed at ensuring the safety and security of online transactions in Pakistan, as the use of digital lending apps has increased significantly in recent years. By providing a clear list of approved apps, SECP hopes to prevent fraud and protect consumers from potential scams.

The SECP's efforts are part of a larger push towards greater regulation of the digital lending sector in Pakistan. In recent months, the government has taken several steps to tighten oversight and prevent abuse, including the introduction of new rules governing the registration and licensing of digital lenders.