Nirav Choksi
India’s Fintech ecosystem is a formidable global force…After a decade of hypergrowth, the fintech sector in the country has registered $6 billion in investments over the past two years, signifying the sector’s rapid maturity and deepening role in the financial services ecosystem.
At the heart of this transformation is the Digital Public Infrastructure (DPI)—a foundational enabler of seamless, data-driven financial services.
Broadening credit coverage through DPI-powered fintech models
In a country of 64 million Micro, Small, and Medium Enterprises (MSMEs)—access to institutional credit remains a persistent challenge. Owing to limited working capital financing, close to 61,500 MSMEs have closed down in the last four years.
Meanwhile, DPI has been instrumental in delivering global development outcomes at a rate that is otherwise impossible to imagine. DPI systems like UPI and Aadhaar are reaching 97 per cent or close to India’s 1.3 billion citizens, and the Open Credit Enablement Network (OCEN) operates in over 720 cities. This is a testament to India’s impressive DPI build-out that ensures essential services—such as financial transactions, authentication, and e-governance—are accessible at a national scale.
Fintechs are banking on DPI’s enormous scale to enable speedier financial inclusion. DPI is allowing fintechs to access broader datasets—making risk assessments more dynamic and inclusive—and extending credit to businesses that would otherwise be overlooked by traditional financial institutions.
Some of the DPI-enabled approaches include:
● Transactional data analysis: Fintechs assess spending patterns, supplier payments, and utility bills to gauge MSMEs’ financial health.
● Social and behavioural insights: Digital footprint data—such as supply chain transactions—helps fintechs refine credit scoring models.
● Tax and compliance records: GST filings and e-invoicing data provide real-time insights into revenue trends, reducing the reliance on traditional balance sheets.
As a result, DPI-based frameworks like Account Aggregators (AA), OCEN, and GST-linked lending are ensuring MSMEs with poor credit history can unlock working capital based on transaction records, tax filings, and digital payments data.
By leveraging interoperable systems that integrate real-time financial data, alternative credit scoring models, and digital lending platforms—DPI is empowering fintechs to reduce dependency on rigid legacy credit scoring models and offer flexible working capital solutions tailored to MSMEs’ realities.
With India’s DPI now attracting worldwide interest, here’s a look at how it is reshaping the credit ecosystem in the country:
● Digital KYC slashes onboarding costs by 80 per cent for banks in India, lowering the cost from $15–20 to $3 per customer
● India’s digital economy achieved 2.5X growth from $110 billion in 2019 to $270+ billion in 2024
● DPI-based alternative credit scoring and better risk management modules cut default rates by 30 per cent
Enabling financial inclusion with DPI-backed liquidity solutions
With unpaid dues to MSMEs continuing to choke their cash flows, businesses are often left in a cycle of uncertainty. By integrating DPI-backed financing solutions—fintechs are addressing the core liquidity challenges faced by MSMEs with invoice financing and real-time settlements.
DPI-enabled marketplaces combined with fintech innovations are removing structural barriers and embedding financial services directly into commerce platforms—making credit a built-in feature.
Fintechs are capitalising on DPI-enabled marketplaces to provide:
● Dynamic credit underwriting: Instead of relying on past credit histories—fintechs use real-time sales data from marketplaces like Open Network for Digital Commerce (ONDC) to offer instant working capital loans.
● Pre-approved credit at checkout: MSMEs buying raw materials or inventory on digital marketplaces can access instant financing at the time of purchase. Fintechs can assess the repayment ability of these businesses based on marketplace transactions and offer tailored loan terms.
DPI as a growth engine for fintech-led credit expansion
With DPI-driven credit solutions, fintechs are speeding up credit disbursements from months to days. As fintechs refine working capital financing models, lending can now be adjusted dynamically, allowing MSMEs to access innovative financing options like pay-as-you-use financing.
India’s DPI model has resulted in 12x growth in digital lending and driven 80 per cent financial inclusions in six years. With regulatory backing and DPI-led innovation—fintechs can unlock a multi-billion-dollar opportunity in working capital financing. Moreover, the collaboration between fintechs, banks, and regulatory bodies is central to making this shift sustainable.
As DPI adoption accelerates, fintechs that embrace alternative credit decisioning, embedded lending, and AI-driven underwriting will lead the next phase of India’s MSME lending revolution—one that prioritises access, affordability, and agility for 64 million MSMEs.
