Democratising Credit Using Artificial Intelligence And Alternative Data

Anurag Gupta

doi:10.59571/mpi.v3si1.3

Article

Democratising Credit Using Artificial Intelligence And Alternative Data

VIEWS 11
PDF 3

Management Practice Insights

DOI: 10.59571/mpi.v3si1.3

Year: 2025, Volume: 3, Issue: Special Issue 1, Pages: 12-18

Original Article

Democratising Credit Using Artificial Intelligence And Alternative Data

Anurag Gupta ¹

¹ Professor in the Department of Banking & Finance, Weatherhead School of Management, Case Western Reserve University

Correspondence

[email protected]

Received Date:27 May 2025, Accepted Date:29 May 2025, Published Date:30 June 2025

This work is licensed under a Creative Commons Attribution 4.0 International License.

Abstract

Access to credit is essential for economic growth. Banks have traditionally served this role, providing credit to individuals and companies. However, significant proportions in both segments remain underserved, globally – small and medium-sized enterprises (SMEs), individuals with no or short credit histories or those lacking sufficient collateral. These barriers are especially severe in emerging economies with fewer regional and community banks. Artificial Intelligence (AI) models using alternative data have the potential to materially alleviate this problem and revolutionise credit access.

References

1 “Buy Now Pay Later 2024 – What Comes Next?,” GlobalData (blog), July 5, 2024, https://www.globaldata.com/store/report/buy-now-pay-latermarket-analysis/.

2 “CFPB Explores Impact of Alternative Data on Credit Access for Consumers Who Are Credit Invisible,” Consumer Financial Protection Bureau, 2017, https://www.consumerfinance.gov/about-us/newsroom/cfpbexplores-impact-alternative-data-credit-access-consumers-whoare-credit-invisible/.

3 Marco Di Maggio, Dimuthu Ratnadiwakara, and Don Carmichael, “Invisible Primes: Fintech Lending with Alternative Data” (National Bureau of Economic Research, 2022), https://www.nber.org/papers/w29840.

4 Giulio Cornelli et al., “The Impact of Fintech Lending on Credit Access for U.S. Small Businesses,” Journal of Financial Stability 73 (August 1, 2024): 101290, https://doi.org/10.1016/j.jfs.2024.101290.

5 Isil Erel and Jack Liebersohn, “Can FinTech Reduce Disparities in Access to Finance? Evidence from the Paycheck Protection Program,” Journal of Financial Economics 146, no. 1 (October 1, 2022): 90–118, https://doi.org/10.1016/j.jfineco.2022.05.004.

6 Sabrina T. Howell et al., “Lender Automation and Racial Disparities in Credit Access,” The Journal of Finance 79, no. 2 (December 11, 2023): 1457–1512, https://doi.org/10.1111/jofi.13303.

7 Sergey Chernenko et al., “Applications or Approvals: What Drives Racial Disparities in the Paycheck Protection Program?,” Working Paper, Working Paper Series (National Bureau of Economic Research, April 2023), https://doi.org/10.3386/w31172.

8 Erik Dolson and Julapa Jagtiani, “Which Lenders Are More Likely to Reach Out to Underserved Consumers: Banks Versus Fintechs Versus Other Nonbanks?,” Journal of Alternative Finance 1, no. 1 (March 1, 2024): 35–66, https://doi.org/10.1177/27533743231218019.

9 Decentro Fintech Infrastructure, “Digital Lending Industry: Market Size and Statistics,” n.d., https://decentro.tech/help/faqs/digital-lending-market-sizein-india?

10 DD News, “India Stands Out as Global Fintech Bright Spot as Credit Demand Surges,”, https://ddnews.gov.in/en/indiastands-out-as-global-fintech-bright-spot-as-credit-demandsurges/.

11 Department of Financial Services, Ministry of Finance, Government of India, “Account Aggregator Framework,” 2024, https://financialservices.gov.in/beta/en/account-aggregatorframework.

12 OCEN, “Open Credit Enablement Network: Democratising Credit,” n.d., https://ocen.dev/#:~:text=Credit%20gap%20for%20MSMEs%20is,25%20trillion.

13 Anoop Verma, “Next Gen AI & India's Financial Leap: Building Inclusive Credit Systems for the Unbanked,” ETGovernment, April 21, 2025, sec. news/digital-india, https://government.economictimes.indiatimes.com/news/digital-india/next-gen-ai-indias-financial-leap-building-inclusivecredit-systems-for-the-unbanked/120456758.

14 Ajinkya Kawale, “Compliance Costs May Spur Fintech Sector Consolidation: Industry Experts,” Business Standard, December 24, 2023, https://www.businessstandard.com/economy/news/compliance-may-lead-toconsolidation-of-fintech-sector-industry-players-123122400506_1.html.