In the context of India, a person typically requires a financial history to be approved for credit. However, access to credit is often taken for granted in developed countries. Traditionally, in order to provide credit to someone, a credit score needs to be established. Artificial intelligence (AI) enables financial service providers to utilize alternative data sources, such as information from a person's phone, which can be shared for the purpose of obtaining credit. Additionally, satellite images can provide estimates of past and future agriculture income, as well as the timing and sources of this income. These satellite images can offer valuable inputs for credit assessments specifically tailored to small farmers.
A person's phone contains numerous features that can be extracted, and AI is capable of relating these seemingly unrelated features to generate a single credit score based on past loan behavior examples. By leveraging AI and data analytics, financial products like loans can become accessible to a significant portion of the Indian population that lacks a formal bank account, payslips, or a digital financial track record. The process of disbursing small loan amounts becomes financially viable since the entire process is automated and scalable. Fintech companies have discovered a way to overcome the regulatory hurdles that have traditionally prevented traditional banks from lending to the poor. The concept of providing loans solely based on the data available on a consumer's mobile device, thereby creating a mobile digital credit store, was previously untested but has now become a reality.
We are witnessing the emergence of new business models where traditional banks are partnering with fintech companies to provide digital credit services. Additionally, non-bank fintechs are also entering the digital lending space. These innovations, driven by AI and big data analytics, aim to enhance financial inclusion in emerging economies like India. The objective of this session is to discuss some of these innovations and their potential impact on expanding access to financial services in India.
Written By:
Prof. Himanshu Agarwal
D.N. College, Meerut , U.P
India
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