Open Banking And Digital Payments: Implications For Credit Access

Nirupama Kulkarni, Shashwat Alok, Pulak Ghosh and Manju Puri

Working Papers from Centre for Advanced Financial Research and Learning (CAFRAL)

Abstract: Does the ability to generate verifiable digital financial histories, with customers having data-sharing rights, improve credit access? We answer this using India’s launch of an Open-Banking based public digital payment infrastructure (UPI). Using rarely available data on the universe of consumer loans we show credit increases by both fintechs (new entrants) and banks (incumbents), on the intensive and extensive margin, including increased credit to subprime and new-to-credit customers. We show several mechanisms at play: low-cost internet improves credit access, lenders weigh in digital histories, and digital payments with Open Banking effectively complement first-time bank accounts enabling access to formal credit.

Keywords: Open Banking; Digital payments; UPI; FinTech; Financial Inclusion; Credit Access (search for similar items in EconPapers)
JEL-codes: D14 J15 R21 R23 R31 (search for similar items in EconPapers)
Pages: 67
Date: 2024-12
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Persistent link: https://EconPapers.repec.org/RePEc:ris:cafral:022271

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