India’s fintech sector has already transformed payments. The next target is credit.
The Unified Payments Interface created a massive digital transaction layer across the country. In the financial year ending in March, UPI processed about 314 trillion rupees, or roughly $3.2 trillion, according to the source. PhonePe and Google Pay accounted for more than 70% of those transactions.
That scale gives fintech companies something traditional lenders historically lacked: granular behavioral data on consumers and small businesses with limited formal credit histories.
The opportunity is large. Deloitte estimates that only 15% of Indian adults have access to formal credit, compared with a global average of 24%. More than 85% of micro, small and medium enterprises still rely on informal financing.
Fintech firms are trying to close that gap with small digital loans and credit lines embedded directly into payment platforms.
BharatPe recently introduced BharatPe Flex, which offers pre-approved credit of up to 60,000 rupees for UPI purchases at online and offline merchants. The product turns a payment relationship into a lending relationship without requiring the customer to visit a bank branch.
Data is the core advantage. UPI transaction history, e-commerce purchases and even geolocation information can help lenders estimate income stability and local economic conditions. That can make underwriting possible for borrowers who do not have long bank-credit records.
Amazon Pay also sees digital lending as a significant opportunity because its marketplace already connects millions of buyers and sellers. Customer and merchant activity can provide additional signals about cash flow and purchasing behavior.
The growth case is compelling, but lending is fundamentally different from payments. A payments company mainly manages transaction reliability and fraud. A lender takes balance-sheet or credit risk and can lose principal when customers default.
That means the next phase of Indian fintech growth will be judged on underwriting quality, not only user adoption. Rapid expansion into unsecured small loans can produce strong revenue while the economy is healthy and then generate losses when conditions weaken.
Regulation will also matter. Policymakers want more credit flowing to underserved consumers and small businesses, but they also need to prevent aggressive lending and over-indebtedness.
The strategic opportunity is strongest for platforms that can use payment data to price risk better than traditional lenders. If transaction history meaningfully improves credit decisions, fintech companies can expand access while maintaining acceptable loss rates.
India’s digital-payments revolution created the infrastructure. Credit is where the economics can become much larger — and where the risk becomes much more serious. The winners will be the firms that prove their data advantage survives a full credit cycle.
Credit bureaus and bank partnerships will remain important even with richer alternative data. Transaction information can improve underwriting, but lenders still need reliable identity, repayment history and collections processes. The best fintech models are likely to combine new data with traditional credit discipline.
Funding sources will be critical. Some fintech lenders originate loans and sell them to banks or nonbank partners, while others retain more risk directly. Those models behave very differently during a downturn. Investors should examine who ultimately bears the credit loss, how underwriting models are validated and whether platforms depend on continuous wholesale funding. Payments businesses can scale with relatively little balance-sheet risk; lending businesses cannot. The move into credit may increase revenue per user, but it also means fintech valuations should begin incorporating loss rates and capital requirements.