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Open Banking And Digital Payments: Implications For Credit Access

Author

Listed:
  • Nirupama K Kulkarni

    (Centre for Advanced Financial Research and Learning (CAFRAL))

  • Shashwat Alok

    (Indian School of Business)

  • Pulak Ghosh

    (Indian Institute of Management Bangalore)

  • Manju Puri

    (Duke University)

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.

Suggested Citation

  • Nirupama K Kulkarni & Shashwat Alok & Pulak Ghosh & Manju Puri, 2024. "Open Banking And Digital Payments: Implications For Credit Access," Working Papers 022271, Centre for Advanced Financial Research and Learning (CAFRAL).
    • Handle: RePEc:ris:cafral:022271
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    File URL: https://www.cafral.org.in/sfControl/content/Speech/129202464026PMNKDec2024.pdf
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    Keywords

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    JEL classification:

    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • J15 - Labor and Demographic Economics - - Demographic Economics - - - Economics of Minorities, Races, Indigenous Peoples, and Immigrants; Non-labor Discrimination
    • R21 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Housing Demand
    • R23 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Regional Migration; Regional Labor Markets; Population
    • R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets

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