From QR codes to credit scores: How digital payment data could redefine lending in India

The digital payment revolution has transformed how transactions occur in India. From tea stalls along the roadside to grocery stores in the neighbourhood, QR codes and online payment options have become the new standard of transactions across the country. 

The fast development of digital payment systems is producing an incredible amount of financial information. Any transaction, regardless of its magnitude, is leaving its digital footprint. Perhaps this is the beginning of offering credit identity to millions of small businesses and individuals who are yet to be given access to the formal credit system.

The main requirement of obtaining institutional credit in India has always been formal financial documentation through receipts of salary, tax returns, collateral, and a credit history. Nevertheless, the informal sector comprises a large share of the Indian economic activity where the said documentation does not exist. It has been noted that small business people and freelance professionals find it challenging to access institutional credit in spite of having well-performing businesses.

Digital payments in India have seen phenomenal growth over the years, propelled by the introduction and utilisation of Unified Payments Interface. UPI has emerged as the Indian retail digital payments stalwart. It has facilitated real-time and economical online retail purchases in different banks and applications. The interface handled 21.70 billion transactions in January 2026, worth Rs 28.33 lakh crore, according to the Press Information Bureau.

These transactions are more important than the feasibility of payment systems. All these online payments offer behavioural financial data, which, in turn, can be used to determine patterns related to the flow of income, business operation, and consumption. When used in a responsible manner, this information will enable lenders to develop a more precise picture of a borrower and his financial health. For instance, a small shop owner may not have audited financial statements or a credit score, but they may be getting online payments via QR codes. This gives a sure sign on the flows of revenue per day.

The evolution of the digital public infrastructure in India is beginning to actualise such data-based models of lending. Infrastructure such as the Account Aggregator model, which is governed under the umbrella of the Reserve bank of India, enables individuals and assorted businesses to provide their financial information to lenders by a consent-based model. This enables the lenders to make increased credit decisions grounded on a multiplicity of confirmed monetary data, rather than on a mere piece of paper.

The growth of digital payment systems is also reaching the rural and semi-urban markets outside metropolitan cities. With the increased number of digital transactions in rural and semi-urban markets, small traders and enterprises begin to leave a digital footprint that indicates economic activities that are executed by them. This online presence has a potential future use; it may later be utilised as a substitute credit profile, enabling lenders to make superior credit decisions and issue loans to borrowers who were not members of the formal financial system previously.

However, the use of alternative data in lending must be done with caution. Questions on privacy of data, consumer consent, and the understanding of algorithms will remain important issues as financial institutions strive to introduce digital transactional data into their decision-making process. It is necessary to make sure consumers have control over the sharing and use of their financial data in the development of digital lending platforms.

With proper management, integration of digital payment data into credit evaluation tools could be a good move towards developing financial inclusion in India. In the case of millions of small businesses that have had to rely on informal means of acquiring borrowing, the availability of digital payments information may open new opportunities for them to enter the formal systems of acquisition of credit. 

In that respect, the simplistic experience of scanning a QR code to make regular payments may have profound consequences in the evolution of financial inclusion in India—in how lenders evaluate confidence, financial austerity, and credit value in the emerging digital economy of the country.

The author is CEO and Director of fintech company Payinstacard.