Open Banking and Digital Payments : Implications for Credit Access

Does the ability to generate verifiable digital financial histories, with customers having data-sharing rights, improve credit access? We answer this using India's launch of an Open-Banking based public digital payment infrastructure (UPI). Using rarely available data on the universe of consumer loans we show credit increases by both fintechs (new entrants) and banks (incumbents), on the intensive and extensive margin, including increased credit to subprime and new-to-credit customers. We show several mechanisms at play: low-cost internet improves credit access, lenders weigh in digital histories, and digital payments with Open Banking effectively complement first-time bank accounts enabling access to formal credit