Nithin Kamath Sparks Debate, Should Banks Face Regulations for Loan Closures
The Dark Side of Digital Banking, Unveiling 'Dark Patterns' in India
19 September 2023
Nithin Kamath, co-founder of Zerodha, highlighted the frustration many Indian consumers face when trying to close personal loans due to cumbersome in-person bank branch visits.
Kamath's concerns have sparked discussions about the need for regulatory measures to ensure banks provide more consumer-friendly processes for closing personal loans in the digital age.
The Indian government has also taken steps to address deceptive online practices, known as "dark patterns," by identifying nine such tactics and proposing guidelines to protect consumer rights in online interactions.
In a recent revelation, Nithin Kamath, the co-founder of Zerodha and a billionaire in his own right, shed light on a frustrating ordeal that many consumers in India face when attempting to close a personal loan. Kamath's observations have raised important questions about the persistence of this issue and whether regulatory measures are needed to ensure a more convenient and efficient process for customers.
Kamath's eye-opening account revolved around a colleague who found himself entangled in a bewildering situation. To close a personal loan that was originally obtained online, his colleague was required to make a physical visit to a bank branch. Adding to the complexity, this particular branch happened to be one of only two such branches in the bustling city of Bengaluru.
This narrative may sound all too familiar to many consumers, as various banks in India seem to follow a similar pattern. Customers often encounter significant hurdles when attempting to close their accounts or complete other post-sales procedures, despite the initial ease of obtaining the loan online.
Kamath's account has sparked discussions about whether regulatory bodies should intervene to rectify this ongoing issue. The question at the forefront of these discussions is whether banks should be mandated to provide more consumer-friendly processes for closing personal loans.
While banks have increasingly embraced online and digital banking solutions, the requirement for in-person branch visits to complete certain transactions remains a persistent frustration for customers. Kamath's call for regulatory oversight prompts a reconsideration of these procedures and their alignment with the convenience and efficiency expected in today's digital age.
As consumers and financial industry experts continue to engage in these discussions, the hope is that banks and regulatory bodies will take heed of these concerns. It's essential to work toward creating a more streamlined and consumer-centric approach to closing personal loans. By doing so, banks can enhance customer satisfaction and ensure that their services remain in tune with the evolving expectations of today's digitally savvy consumers.
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What does the Indian government say about 'Dark Pattern'?
Earlier in July, the government said it had identified nine 'dark patterns', or tactics used by online platforms to manipulate consumers. Some patterns include creating a false sense of urgency, adding products to the cart without consent, forcing users to sign up to access content, confirm shaming, hidden costs, and nagging.
Earlier this month, the government released guidelines for public consultation. The draft defines “dark patterns” as “any practices or deceptive design patterns using UI/UX (user interface/user experience) interactions on any platform; designed to mislead or trick users into doing something they originally did not intend or want to do; by subverting or impairing the consumer autonomy, decision making or choice; amounting to a misleading advertisement or unfair trade practice or violation of consumer rights.”
For instance, “false urgency” is a dark pattern under which the online seller makes false claims of limited stock (“hurry, only two items left!”) which misleads the user/buyer into making an immediate purchase or acting immediately.
The draft guidelines, once notified, shall apply to all platforms systematically offering goods or services in India, advertisers and sellers.
The document specifies 10 types of dark patterns: False urgency, basket sneaking, confirm shaming, forced action, subscription trap, interface interference, bait and switch, drip pricing, disguised advertising, and nagging.
What is Dark Pattern?
A "dark pattern" is a term used to describe user interfaces that are designed to manipulate users into taking actions that may not be in their best interest but benefit the business or organization behind the website or app.
These manipulative designs can trick users into spending more money than they intended, giving away more personal data or making choices they wouldn't have made otherwise. The term was coined by user experience expert Harry Brignull in 2010.
Nithin Kamath's call for regulation on banks making it hard for customers to close an account falls in line with the broader conversation on "dark patterns." It highlights the importance of consumer rights and transparency in financial transactions, ultimately aiming to create a more equitable and user-friendly financial landscape in India.