NPCI working on Digital Payments Score (A new kind of credit bureau to scale up credit economy in India)

NPCI working on Digital Payments Score (A new kind of credit bureau to scale up credit economy in India):

The National Payments Corporation of India (NPCI) is planning to come up with a Digital Payments Score (DPS) aimed at strengthening the country’s credit scoring system while creating more efficiency and growth, a top NPCI official said here on Wednesday.

According to senior executives from NPCI, this will be piloted with a few lenders in the near future.

“We at NPCI are working to look at whether there is an opportunity to create a digital payment score that can become part of the credit scoring process. We will be piloting this with a couple of lenders and then see how this really works out,” said Praveena Rai, Chief Operating Officer (COO), NPCI.

Rai was speaking at the Bharat Fintech Summit ‘24 in Mumbai.

“When it comes to credit scoring in India, the data scoring models are still far behind the level of sophistication one would find in many developed markets,” she added.

Rai elucidated that awareness of credit identity is going to become important, and the industry along with the ecosystem will have to step up to do so.

“The need to create and build a strong awareness of the need for people to build a credit identity is still lacking. In a market like the US, even a student will start using a credit card not because they need it but because they just want to build up their credit identity,” she added.

In terms of parameters, DPS may look at indicators like stability in a person’s finances such as timely payments, periodic bill payments, and if a person who frequently transacts for high-value items has the income to support them.

“Whether there are open source platforms, alternate data sources, decentralised collections, or more sort of work on the bureau side, it may probably be the evolution of new kind of bureau which looks at these new kinds of scores. This convergence for us to really take the digital payment story and tie it up with that credit opportunity will lead to a situation where we can formalise this credit economy, grow and scale the credit economy and create more efficiency and growth,” she added.