India's Unified Payments Interface (UPI) has transformed financial access since its launch in 2016, enabling seamless digital transactions for 300 million individuals and 50 million merchants. A recent study highlights UPI's significant impact on credit availability, particularly for underserved groups, showcasing a replicable model for other nations.
The study, titled 'Open Banking and Digital Payments: Implications for Credit Access', reveals that increased UPI adoption correlates with substantial credit growth, including an 8% rise for subprime borrowers. Remarkably, this growth occurred without an increase in default rates, indicating responsible lending practices driven by digital transaction data.
By October 2023, 75% of all retail digital payments in India were conducted through UPI. The affordability of digital technology has facilitated its widespread adoption across both rural and urban areas.
Key findings emphasize that a 10% increase in UPI transactions led to a 7% rise in credit availability, illustrating how digital financial histories enhance lenders' ability to assess borrowers. This indigenous fintech solution combines public digital infrastructure with open banking policies, reducing financial exclusion and fostering equitable economic growth.