India stands at a decisive inflection point in its credit evolution. While more than a billion Indians are credit-eligible, fewer than three hundred million currently access formal credit. The remaining 450 million individuals, which is nearly half the nation’s adult population, remain “credit invisible”. This exclusion is not by intent or risk, but by the absence of data that proves their financial credibility.
This gap exposes the fundamental flaw in the traditional bureau-led lending model, which continues to rely heavily on historic credit interactions. Bureau scores, while reliable for those already within the system, fail to represent India’s dynamic and informal economy: the gig workers, micro-entrepreneurs, kirana store owners, and daily earners whose livelihoods are steady but undocumented. For them, the lack of visibility becomes the barrier to opportunity.
Alternate data is beginning to change that equation. By analysing non-traditional financial and behavioural signals from bank transaction histories and income flows to digital payments, telecom, and GST filings, lenders can now unlock deeper insights into an individual’s capacity and intent to repay. This shift from a document-based to a data-intelligent credit model marks one of the most transformative developments in India’s financial ecosystem.
What was once a “thin file” is rapidly becoming a comprehensive digital identity, giving lenders the confidence to extend credit responsibly to first-time borrowers. As India moves towards a consent-based, digitally empowered economy, alternate data is emerging as the cornerstone of financial inclusion by enabling credit to reach the next billion borrowers who were previously unseen by the formal system.
India’s Credit Paradox — The Invisible Majority
India’s credit story is one of both scale and contradiction!
Close to a billion individuals deemed credit-eligible, the country represents one of the world’s largest untapped lending markets. Yet, despite this potential, only about 27% — roughly 277 million people — actively participate in formal credit systems. The rest, an estimated 450 million individuals, remain outside the radar of traditional lenders.
This phenomenon is not driven by an absence of economic activity. In fact, India’s so-called credit invisible population forms the very backbone of its economy. Gig workers, small traders, micro-entrepreneurs, and informal earners contribute significantly to GDP growth and consumption but operate largely in cash-heavy environments where data trails are scarce.
The paradox lies in this disconnect between ability and visibility. Many of these individuals and small businesses have stable incomes, disciplined spending patterns, and consistent repayment potential. Yet, their exclusion persists simply because their financial lives do not fit within the frameworks of bureau-centric credit assessment. Without a prior loan or credit card, there is no bureau footprint and without that footprint, there is no access to new credit.
This legacy model, though effective for assessing risk in traditional markets, has reached its natural ceiling. Bureau-based scoring captures those already within the formal system but fails to scale beyond it. As a result, millions remain locked out of affordable credit, pushing them toward informal or exploitative lending channels.
To move forward, India needs to expand its definition of what constitutes “creditworthiness.” The next chapter of inclusion will not be written by expanding the reach of bureaus alone but by redefining visibility itself and capturing the data signals that reveal the financial reality of those left unseen.
Why Alternate Data is the Game-Changer
Every major transformation in the credit industry has been driven by a single force: visibility. The better lenders can see, the better they can assess, price, and extend credit. Alternate data represents the next leap in that journey by building a bridge between financial invisibility and informed decision-making.
At its core, alternate data refers to non-traditional data sources that provide additional insights into a person’s or business’s financial behaviour. Unlike bureau data, which depends on recorded credit events, alternate data draws from a diverse range of real-world digital interactions that reflect earning patterns, spending discipline, and repayment capacity.
These signals go far beyond the usual credit report. They include:
- Bank transaction patterns: Inflow regularity, balance trends, and expense-to-income ratios.
- Telecom and mobile data: Prepaid recharge frequency, bill payment regularity, and network tenure.
- Digital footprints: UPI usage, e-commerce transactions, and online payment consistency.
- Employment and income data: salary credits, gig platform payouts, and employment continuity.
- Business filings and compliance records: GST filings, trade licenses, and MCA data for MSMEs.
Together, these data points paint a multi-dimensional picture of financial trustworthiness that captures both capacity and intent, even when a traditional credit score is missing. For example, a gig worker with steady monthly payouts and regular bill payments demonstrates financial discipline, even without a credit card or loan history.
For lenders, this translates into a powerful advantage. Alternate data makes it possible to underwrite borrowers who were previously invisible, opening up access to a massive untapped market while maintaining prudent risk management. It allows lending decisions to be rooted not in past credit exposure, but in present financial reality.
In a country as diverse and data-rich as India, this approach aligns perfectly with the broader goal of inclusive, consent-driven digital finance. It enables credit to move at the speed of information in a manner that is contextual, fair, and intelligent.
Who Are the “Next Billion” Borrowers?
The phrase “next billion borrowers” isn’t a metaphor. It represents India’s emerging economic mainstream — individuals and businesses who contribute actively to the economy but remain disconnected from formal credit systems. This group spans gig workers, self-employed professionals, micro-entrepreneurs, small retailers, and rural earners, many of whom operate outside the documentation-heavy frameworks of traditional lending.
A Growing Force in India’s Economy
Over the past decade, India’s economy has undergone a profound shift. Digital payments, e-commerce, and mobile connectivity have expanded rapidly beyond metros, driving consumption and entrepreneurship in Tier-2 and Tier-3 cities. Yet this same growth has outpaced the evolution of traditional credit infrastructure.
According to recent studies, nearly 80% of new credit demand is now emerging from non-metro India, where borrowers may not have formal income proof or a bureau score. They transact through UPI, receive payments directly into bank accounts, and build micro-businesses that operate on trust and digital agility rather than paperwork.
For instance, a merchant on Meesho might have predictable weekly earnings and a steady cash flow. However, because their income doesn’t flow through a salary slip or formal employer, they are invisible to credit bureaus. Similarly, small businesses filing regular GST returns and maintaining stable account balances may still be labelled “thin file” due to missing loan histories.
This is precisely where alternate data delivers its most profound impact. By analysing bank statement flows, payment consistency, mobile recharges, and transactional stability, lenders can infer the borrower’s ability and willingness to repay far more accurately than a bureau score ever could for first-time borrowers.
The outcome is a new paradigm of inclusion that rewards real-world behaviour instead of penalising lack of history. Alternate data transforms the definition of “creditworthy” from one tied to legacy documentation into one rooted in economic participation and digital transparency.
For lenders, this unlocks access to a vast, under-served segment of potential customers. For borrowers, it restores agency by allowing them to be recognised not as “unbanked” or “informal,” but as legitimate participants in India’s credit economy.
How Lenders Are Adapting to the Alternate Data Revolution
The evolution of India’s credit ecosystem mirrors the maturity curve of any major technological disruption; innovation begins at the edges before it reshapes the core.
Over the past few years, alternate data has travelled this path, moving from an experimental fintech tool to a mainstream enabler of financial inclusion.
Fintechs: The Early Adopters
Fintechs were the first to recognize that bureau-dependent lending was inherently exclusionary. With agility, data science capabilities, and a digital-first approach, they began to underwrite customers outside traditional parameters. By leveraging data from mobile devices, payments apps, and bank statements, these companies built alternative credit models that could score customers in seconds without requiring a single piece of paperwork.
Operating in Tier-2 and Tier-3 markets, fintechs successfully demonstrated that credit invisibility does not equal credit risk. Many of these borrowers exhibited strong repayment behaviour once given the opportunity, proving that visibility and not capability was the real constraint.
NBFCs: Scaling the Model
Following fintechs’ success, Non-Banking Financial Companies (NBFCs) became the bridge between innovation and scalability. They began integrating alternate data into their underwriting models to reach segments previously deemed unbankable, especially small businesses, self-employed professionals, and gig economy participants.
NBFCs used alternate data not just for loan origination but also for portfolio monitoring and risk segmentation, helping them manage delinquency rates with far greater precision. In doing so, they showed that alternate data could co-exist with traditional bureau data by creating hybrid models that blend speed with stability.
Banks: Gradual but Strategic Entry
Traditional banks, historically conservative in their risk frameworks, are now acknowledging that bureau-led models alone can no longer fuel growth. With credit penetration plateauing among salaried and urban populations, banks are beginning to collaborate with fintech partners and data infrastructure providers to integrate alternate data into their decisioning systems. Banks are experimenting with account aggregator (AA) frameworks, transaction analytics, and consent-based data models to strengthen both reach and reliability.
Epilogue
India’s credit story has always been one of paradoxes as it is a growing economy with millions still outside the formal lending fold. But alternate data is changing that equation, one digital footprint at a time.
For decades, access to credit was determined by what the system could see: a limited history of formal borrowing, often skewed towards salaried, urban populations. Today, that visibility has expanded. Every transaction, bill payment, and business receipt has become a potential proof of credibility. Inclusion is no longer an act of concession; it’s a function of better data.
This transformation isn’t without challenges: data privacy, consent, and algorithmic fairness will remain at the heart of regulatory and ethical debates. Yet, the direction is unmistakable. The industry is moving towards a model that is not just faster and smarter, but fundamentally more just.
In this new ecosystem, lenders will compete not on interest rates alone, but on their ability to understand, personalise, and empower. The winners will be those who treat data not as a commodity, but as a bridge that connects intent with opportunity, and aspiration with access.