Empowering Thin-File Lending with UPI Behavioural Data

New-to-Credit? No Problem: How Banks Can Unlock Growth with UPI Behavioural Data

3 minutes read

Nitya

Subscribe to newsletter

Subscribe to receive the latest blog posts to your inbox every week.

By subscribing you agree to with our Privacy Policy.

Introduction: The Untapped Potential of New-to-Credit Segments

India’s digital economy is evolving at an unprecedented pace, and the Unified Payments Interface (UPI) has emerged as a cornerstone of this transformation. Millions of individuals across urban and rural areas now actively use UPI for their day-to-day financial transactions. Despite their growing digital footprint, many remain invisible to credit bureaus due to the absence of formal credit history.

These individuals—referred to as thin-file customers in India—represent a largely untapped and high-potential segment for banks. However, underwriting credit for this group has traditionally posed a challenge. Without historical credit records, how can banks confidently assess their creditworthiness?

The answer lies in behavioural insights from UPI transactions. This blog explores how banks can use real-time transaction data to build intelligent, inclusive, and future-ready credit portfolios—unlocking significant opportunities for new-to-credit underwriting and financial inclusion with UPI data.

Why Traditional Underwriting Leaves Gaps

Conventional credit evaluation frameworks depend heavily on bureau data, which systematically excludes:

Young professionals and freelancers entering the workforce
Gig economy workers with variable income streams
Rural populations lacking formal financial history
First-time borrowers transitioning from informal to formal credit systems

As a result, banks miss out on a large customer base and inadvertently widen the financial access gap—limiting inclusive growth and long-term portfolio diversification.

UPI Behavioural Data: A Game-Changer for Thin-File Customers

UPI has redefined digital payments in India, facilitating over 11 billion transactions monthly across diverse geographies. But its true value extends far beyond payments—it acts as a behavioural data goldmine for modern credit scoring.

Key Insights from UPI Behavioural Data:

Transaction frequency and volume: Measures financial engagement
Spending patterns: Differentiates essentials vs. discretionary spends
P2P and bill payments: Signals financial discipline and obligation fulfilment
Cash flow consistency: Reflects income regularity and budgeting habits

These behavioural markers help generate dynamic credit scores, offering banks a real-time and contextual lens to evaluate borrowers—especially those without bureau records.

Want to explore the fundamentals and benefits in more detail? Read how UPI-based credit scoring is redefining lending for banks.

How UPI-Based Lending Boosts Bank Performance

By leveraging UPI behavioural data, banks can modernize and optimize their credit assessment process in several key ways:

1. Smarter New-to-Credit Underwriting

AI-led scoring models analyze UPI patterns to assess creditworthiness even for first-time borrowers. This reduces dependency on outdated static reports and enables faster, data-driven decisions.

2. Driving Financial Inclusion with UPI Data

UPI bridges the gap for underserved segments like daily wage earners, homemakers, and informal sector workers. Banks can now underwrite customers traditionally excluded from bureau coverage—fueling inclusive and responsible credit growth.

3. Faster, Data-Led Loan Approvals

UPI insights, when processed through AI/ML models, help:

Reduce onboarding time
Minimize drop-offs
Enhance end-to-end customer experience

This translates to real-time credit decisions with reduced operational friction.

4. Building Future-Ready Credit Portfolios

Behavioural credit scoring evolves continuously with user activity. Banks gain ongoing visibility into a customer’s intent and capacity to repay—empowering proactive risk management and portfolio optimization.

Use Case: Lending to Thin-File Customers in Tier-2 and Tier-3 Cities

Consider a salaried individual in a Tier-2 city:

Uses UPI to pay rent and utility bills
Receives monthly income digitally
Has no prior loans or credit cards

Under traditional models, this customer would likely be rejected due to the absence of credit history. But by analyzing UPI patterns—timely bill payments, steady cash flows, and responsible spending—a bank can confidently approve a small-ticket loan.

Over time, with continued positive behaviour, this borrower becomes eligible for larger credit products, driving long-term value for the bank and customer alike.

Result: Improved approval rates, reduced risk, and expansion into high-potential markets.

Regulatory Alignment: Ethical and Secure Credit Expansion

Using UPI data for alternative scoring aligns with major national priorities such as:

RBI’s Financial Inclusion Vision 2025
The Digital India Mission
India’s Data Protection Bill (DPDP Act, 2023)

Compliance Best Practices for Banks:

Obtain explicit customer consent for data access
Ensure data privacy and encryption protocols
Maintain auditability and fairness in AI-driven models

By following these guidelines, banks can innovate responsibly while maintaining public trust and regulatory approval.

Why CARD91 is the Right Partner for Banks

CARD91’s AI-powered UPI Credit Score Engine equips banks with the tools needed to transition from traditional to behavioural credit scoring models.

What You Get with CARD91:

Real-Time Behavioural Credit Scoring based on UPI data
Smart Segmentation of thin-file and new-to-credit borrowers
AI/ML-Driven Risk Analysis that adapts with behavioural changes
Built-In Regulatory Compliance, data privacy, and model transparency

Whether you’re expanding into new markets or improving loan portfolio health, CARD91 enables intelligent lending decisions at scale.

Ready to Expand Financial Inclusion with UPI Data?

The future of lending is digital, real-time, and inclusive.

Book a demo with CARD91 today to see how our AI-driven behavioural scoring engine helps you underwrite thin-file customers in India with confidence and precision.