Page 57 - Banking Finance November 2025

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bureau scores alone. The real opportunity lies in richer, enabled over 68 million data fetches, with adoption growing
forward-looking signals - data that's already in front of us. rapidly across banks and NBFCs.
Banking transactions, utility bill payments, and savings
patterns directly reflect a person's ability and willingness to Meanwhile, AI and large language models trained on Indian
pay. transaction patterns can decode narrations and create
personal cash flow statements in seconds. What was once
In Q1 FY26, Rs. 73 lakh crore worth of transactions flowed limited to corporate lending - analysing forward-looking cash
through UPI - almost double the Rs. 36 lakh crore in cash flows - is now possible at scale for individuals.
circulation. And nearly half of that cash isn't even actively
circulating. Alternative data: Future of credit
This is not an argument to discard bureau data altogether.
80-90 per cent of India's transactions have a digital
footprint, and this digital footprint can act as alternate data Bureaus remain useful, but they are just one data point.
to unlock billions of loans in this new world of underwriting.
Alternative data should be treated as the primary signal,
From credit history to credit potential with bureau data serving as secondary validation. That's how
we shift from measuring credit history to evaluating credit
True repayment ability lies in forward-looking signals: potential.
income, growth, savings, spending, and financial discipline.
Shifting the lens from "credit history" to "credit potential" Conclusion: From risk to opportunity -
allows for a more accurate and inclusive way to assess
someone's real ability to manage and repay credit how AI and alternative data can redefine
responsibly. lending in India

Why lending companies must move By embracing alternative data, India's lenders can tap into
new segments, foster genuine financial inclusion, and fuel
beyond scores - and why now? the aspirations of its youngest citizens. The choice before
Until recently, there were two big problems that kept lenders is clear. Remain tied to outdated credit scores and
lenders from using banking data. 1. Borrowers could tamper lose out on 90 per cent of the market, or reimagine risk,
with statements. 2. Transaction narrations were too messy harness alternative data, and unlock the potential of the
for underwriters to interpret. untapped billion.

Now, both barriers have fallen. Here's how: In the world's fastest-growing digital economy, this isn't just
The Account Aggregator (AA) framework now lets lenders the future of credit; it is already the present. Are you ready
access verified data directly from banks. In Q1 FY26, it had to embrace it? (Source: BusinessLine)

UK to introduce digital IDs for workers to deter illegal immigration

The United Kingdom will mandate digital identification for citizens and residents starting new jobs, aiming to pre-
vent illegal employment and curb unauthorised immigration, Prime Minister Keir Starmer announced.
"It will make it tougher to work illegally, making our borders more secure," Starmer said. Immigration remains one
of the top voter concerns, with his government under pressure to control illegal entries. The digital ID will be stored
on mobile phones and will become a required part of employment verification by 2029.

Critics argue the plan could infringe on privacy and fail to deter cash-based illegal work. A Reform UK Party spokes-
person said, "It's laughable that those already breaking immigration law will suddenly comply, or digital IDs will have
any impact on illegal work." The government said the system could eventually be expanded to grant access to other
public services.

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