<img src="https://m2p-website-file.s3.ap-south-1.amazonaws.com/marketing-cms/m2p-blog/2025/06/DIGIPIN%20blog-02.webp" alt="What is DIGIPIN and impact on financial institutions" title="" id="2twdqki1z" width="100%" height="288">India’s digital lending revolution has transformed how millions access credit, but one persistent challenge remains: address verification. In FY24, the BFSI industry reported a 6.4% discrepancy rate in address verification, not only leading to delays in customer onboarding and complicating credit risk assessment but also disrupting last-mile service delivery, impacting both operational efficiency and customer satisfaction.&nbsp;The newly launched DIGIPIN system is set to break these barriers.A joint initiative by India Post, IIT Hyderabad, and ISRO’s National Remote Sensing Centre, DIGIPIN is a GPS-based digital address system designed to eliminate ambiguity in physical addresses by providing precise, standardized location identifiers. And for financial institutions, especially lenders, this innovation could not have come at a better time.Let’s explore what DIGIPIN means for the future of credit, compliance, and financial inclusion.&nbsp;<h2 class="heading-node" id="1f5zun0tx" style="text-align: left">What is DIGIPIN?</h2>DIGIPIN is India’s new digital address system that divides the entire country into uniform 4x4 meter grids, assigning each grid a unique 10-character alphanumeric code based on its latitude and longitude coordinates. &nbsp;This system is open-source, privacy-centric (as it encodes only location, not personal data), and is accessible nationwide, including urban, rural, remote, and maritime areas. &nbsp;<h2 class="heading-node" id="ljdgov5v7" style="text-align: left">Why Lenders Can’t Ignore the Address Problem Anymore?</h2>Unlike traditional PIN codes that cover large areas, DIGIPIN pinpoints the exact location of a property or place, enabling address validation/verification even in unstructured or undocumented areas.&nbsp;DIGIPIN aims to improve the accuracy of deliveries, emergency response, and service provision by eliminating address ambiguity. Users can generate their DIGIPIN by locating their property on the official government portal, making it easy to share precise location information for logistics, e-commerce, and public services.&nbsp;<h2 class="heading-node" id="5ofetxyrz" style="text-align: left">The Hidden Challenge: Why Address Accuracy is Lending’s Next Frontier&nbsp;&nbsp;</h2>India’s lending landscape has been transformed by digital innovations. Advances like eKYC, alternate data sources, and paperless onboarding have streamlined much of the process. Yet, one stubborn obstacle remains: precise location accuracy.&nbsp;For millions of borrowers, particularly those residing in informal settlements, shared accommodations, or newly developed and rapidly growing neighborhoods, having a formal address is elusive. Instead, directions like ‘behind the temple,’ ‘near the water tank,’ or ‘last house in the third lane’ are common. This ambiguity poses a hidden but significant risk for financial institutions including&nbsp;<ol class="list-node" id="vnysrir4h"><li>Lengthy turnaround times (TATs) during Loan Origination.&nbsp;</li></ol><ol class="list-node" id="hoe6ye65x" start="2"><li>High operational cost associated with field verification.&nbsp;&nbsp;</li></ol><ol class="list-node" id="wva2z0eiv" start="3"><li>Increase in risk of identity and address-related fraud.&nbsp;&nbsp;</li></ol><ol class="list-node" id="n1ux0sd9u" start="4"><li>Inefficient and resource-intensive debt collection processes.</li></ol><h2 class="heading-node" id="18on54dmj" style="text-align: left">How DIGIPIN Transforms Lending Operations?</h2>DIGIPIN is more than a technological upgrade, it’s a catalyst for reshaping how financial institutions reach, verify, and serve customers across India’s diverse landscape. &nbsp;Here's how:&nbsp;<ol class="list-node" id="2egcnw8bz"><li>Inclusion Through Address Identity&nbsp;</li></ol>DIGIPIN assigns precise, mappable digital identities to homes in informal settlements, unplanned neighborhoods, and underserved regions.&nbsp;This breakthrough enables lenders to<ul class="list-node" id="odrbrjqdx"><li>Extend micro-loans, gold loans, and embedded credit products to unserved populations.</li><li>Confidently underwrite borrowers without formal addresses.</li><li>Expand their credit footprint into high-potential but previously unaddressable markets.</li></ul>By bridging the addressability gap, DIGIPIN acts as a powerful enabler of true financial inclusion.<ol class="list-node" id="363oaw9qm" start="2"><li>Smarter Customer Onboarding&nbsp;</li></ol>With DIGIPIN integrated as a location-verifiable input in digital KYC processes, lenders can instantly validate a customer’s exact residence, even in areas with ambiguous or non-standard addresses.&nbsp;&nbsp;This will help lenders to&nbsp;<ul class="list-node" id="h8j24ref8"><li>Accelerate onboarding and reduce turnaround times.&nbsp;</li></ul><ul class="list-node" id="wz1diyczg"><li>Lower rejection rates due to unverifiable addresses.&nbsp;</li></ul><ul class="list-node" id="0y559umwa"><li>Minimize customer drop-offs, especially in rural and semi-urban segments.&nbsp;</li></ul>The result is a frictionless, scalable onboarding experience that brings more borrowers into the fold, especially from rural and semi-urban markets.<ol class="list-node" id="yjronbo3x" start="3"><li>Geo-Intelligent Risk Assessment&nbsp;</li></ol>By attaching unique DIGIPINs to borrower profiles, financial institutions unlock powerful geospatial analytics.&nbsp;Lenders can now&nbsp;<ul class="list-node" id="o5kpv519h"><li>Score risk based on borrower clusters and local conditions.&nbsp;</li></ul><ul class="list-node" id="v0zcun5bz"><li>Segment portfolios more accurately across rural, peri-urban, and urban landscapes.&nbsp;</li></ul><ul class="list-node" id="oou9lq8o9"><li>Target loan products to specific geographic needs or opportunities.&nbsp;</li></ul>This granular, location-based intelligence leads to smarter underwriting, better risk management, and more tailored credit offerings.<ol class="list-node" id="ns668kd6h" start="4"><li>Smarter Collections and Recovery at Scale&nbsp;</li></ol>Among its many advantages, DIGIPIN proves especially transformative for collections teams. By enabling map-accurate borrower navigation, it removes the reliance on vague, landmark-based directions, reducing wasted trips and time-to-contact.&nbsp;This level of precision<ul class="list-node" id="od2hed4f3"><li>Enhances route planning for field visits.&nbsp;</li></ul><ul class="list-node" id="xqtohpr8i"><li>Improves skip tracing and borrower reachability.&nbsp;</li></ul><ul class="list-node" id="f3ljrlpt4"><li>Minimizes repeat attempts and fuel costs.&nbsp;</li></ul><ul class="list-node" id="orptyreej"><li>Boosts first-time recovery success rates.&nbsp;</li></ul>&nbsp;For lenders, this means lower field ops overhead and higher recovery efficiency. For agents, it eliminates guesswork and improves safety.<h2 class="heading-node" id="jwtu5cqth" style="text-align: left">Looking Ahead: A New Layer of Intelligence in Financial Services&nbsp;</h2>India’s financial infrastructure has undergone rapid transformation, from Aadhaar-based eKYC to account aggregators, from UPI-led payments to ONDC-based commerce. DIGIPIN completes this digital evolution by providing every location with a standardized, digital identity.&nbsp;As the industry embraces this unified location layer, it opens the door to innovative business models:&nbsp;<ul class="list-node" id="e1l2s0o65"><li>location-based loan offers,&nbsp;&nbsp;</li></ul><ul class="list-node" id="mnbpf8abv"><li>decentralized and more efficient collections,&nbsp;&nbsp;</li></ul><ul class="list-node" id="y7ecvoazr"><li>hyper-local lending, and beyond.&nbsp;</li></ul>With embedded finance, rural digitization, and AI-driven credit models accelerating, access to verifiable, precise, and interoperable location data will be the differentiator that empowers agile lenders to lead the market. DIGIPIN is not just closing the addressability gap; it’s laying the foundation for the next generation of intelligent, inclusive, and responsive financial services.&nbsp;Want to explore how DIGIPIN can enhance your lending stack?&nbsp;<a class="link" href="https://m2pfintech.com/contact-us/?activeKey=1" target="_blank">Talk to our product experts </a>and explore how DIGIPIN can power smarter onboarding, risk control, and credit delivery.&nbsp;<a class="link fui-Link ___1idfs5o f3rmtva f1ewtqcl fyind8e f1k6fduh f1w7gpdv fk6fouc fjoy568 figsok6 f1hu3pq6 f11qmguv f19f4twv f1tyq0we f1g0x7ka fhxju0i f1qch9an f1cnd47f fqv5qza f1vmzxwi f1o700av f13mvf36 f1cmlufx f9n3di6 f1ids18y f1tx3yz7 f1deo86v f1eh06m1 f1iescvh ftqa4ok f2hkw1w fhgqx19 f1olyrje f1p93eir f1h8hb77 f1x7u7e9 f10aw75t fsle3fq f17ae5zn" href="https://m2pfintech.com/newsletter/" target="_blank" rel="noreferrer noopener">Subscribe</a>&nbsp;to our newsletter and get the latest fintech news, views, and insights, directly to your inbox.Follow us on&nbsp;<a class="link fui-Link ___1idfs5o f3rmtva f1ewtqcl fyind8e f1k6fduh f1w7gpdv fk6fouc fjoy568 figsok6 f1hu3pq6 f11qmguv f19f4twv f1tyq0we f1g0x7ka fhxju0i f1qch9an f1cnd47f fqv5qza f1vmzxwi f1o700av f13mvf36 f1cmlufx f9n3di6 f1ids18y f1tx3yz7 f1deo86v f1eh06m1 f1iescvh ftqa4ok f2hkw1w fhgqx19 f1olyrje f1p93eir f1h8hb77 f1x7u7e9 f10aw75t fsle3fq f17ae5zn" href="https://www.linkedin.com/company/m2pfintech/mycompany/" target="_blank" rel="noreferrer noopener">LinkedIn</a>&nbsp;and&nbsp;<a class="link fui-Link ___1idfs5o f3rmtva f1ewtqcl fyind8e f1k6fduh f1w7gpdv fk6fouc fjoy568 figsok6 f1hu3pq6 f11qmguv f19f4twv f1tyq0we f1g0x7ka fhxju0i f1qch9an f1cnd47f fqv5qza f1vmzxwi f1o700av f13mvf36 f1cmlufx f9n3di6 f1ids18y f1tx3yz7 f1deo86v f1eh06m1 f1iescvh ftqa4ok f2hkw1w fhgqx19 f1olyrje f1p93eir f1h8hb77 f1x7u7e9 f10aw75t fsle3fq f17ae5zn" href="https://twitter.com/m2pfintech" target="_blank" rel="noreferrer noopener">Twitter</a>&nbsp;for insightful fintech bytes curated for curious minds like you.

How DIGIPIN can be a Game Changer for Financial Institutions?

<img src="https://m2p-website-file.s3.ap-south-1.amazonaws.com/m2p-website-file/marketing-cms/m2p-blog/2022/04/BNPLs-Risk-Mitigation-Strategies-Wordpress-02.webp" alt="Strategies to reduce credit risks in BNPL" title="" width="100%" height="317">Buy Now, Pay Later (BNPL) is a fascinating financing tool that presents incredible value potential to lenders, merchants, and consumers. Growing into a $100 billion industry globally with over 85% rise in user base (from 2020 to 2021), BNPL has evolved into an inevitable trend in the retail credit space.<h2 class="heading-node" id="zxstxjdpm" style="text-align: left">Win-Win-Win scenario</h2>There are no losers in the BNPL ecosystem. Whether it is consumers or merchants or lenders, all have clear winning potential. Consumers adore the <a class="link" href="https://m2pfintech.com/blog/factors-and-psychology-behind-the-great-bnpl-allure/">power BNPL gives them</a> to shop instantly and cost-efficiently, even if they have no cash at hand. And merchants prefer BNPL payments as its <a class="link" href="https://m2pfintech.com/blog/six-profitable-bnpl-business-models-to-unlock-infinite-value/">business models</a> provide them a great opportunity to drive sales. Sizeable BNPL players have attributed their 20% revenue increase to this consumer credit phenomenon. &nbsp;They’ve even reported that BNPL helped offset the generally higher transaction fees (appr. 4% to 7% per transaction) charged by service providers. Lending institutions love chiming into the BNPL tune, as it broadens and optimizes their credit issuance pipelines and drives scalable shorter-tenure small-ticket financing.<h2 class="heading-node" id="2spiqi6wu" style="text-align: left">Secret sauce to success</h2>Even though BNPL is one happy party, it still comes with some risk factors. Not just from external scamsters, but also from inherent vulnerabilities. Credit risks, chargeback scams, and Account Take Overs (ATOs) are typical issues that plague this consumer financing phenomenon. Managing and mitigating such risks is the secret sauce to successful BNPL operations. Implementing the right mitigation strategies can get rid of underlying risks without hampering customer experience.<h2 class="heading-node" id="kan5wsfe1" style="text-align: left">Mind your risk exposure</h2>A typical BNPL transaction value encompasses credit sanctioned to the customer and the amount reimbursed to the merchant. Usually, a consumer’s intent to pay, repayment capability, soft credit checks, and merchant recommendation are factored in before granting credit access. But this process doesn’t make the system immune to credit risks.Credit risk occurs when a consumer defaults on the repayment after the transaction. The tiniest exposure to default risk can put any lending institution in a vulnerable position. It could even snowball into insolvency and liquidity issues for the BNPL service provider.<h2 class="heading-node" id="gxknqrve8" style="text-align: left">Strategies to mitigate credit risk</h2>Evaluating creditworthiness plays a critical role in controlling credit risk. To make credit assessment as effective and secure as possible, best-in-class risk management parameters and credit profiling are required.As smooth and secure customer experiences are non-negotiable for successful BNPL transactions, customer-centric strategies and efforts need to be directed towards effective credit evaluation. &nbsp;State-of-the-art technologies such as Artificial Intelligence (AI), Machine Learning (ML), and Data Analytics are crucial tools to manage inherent and external risk factors. These technologies help in reducing fraud and default risks by analyzing data patterns across metrics, business performance, cash flows, and past payment track records derived from varied data sources.To mitigate credit risks effectively, the following strategies can be adopted.<h3 class="heading-node" id="zl6327vvl" style="text-align: left">1.Do a credit bureau check</h3>In Nov 2021, RBI amended the Credit Information Companies Regulation 2006, allowing fintechs to access individual consumer credit information from credit information bureaus like TransUnion Cibil, Equifax, Experian, and CRIF. With this amendment fintechs and ecommerce players can partner with lenders directly to issue BNPL on the platform, without acquiring an NBFC license. This enables first-level checks (parameters listed below) for each consumer to determine the risk associated with lending.<ul class="list-node" id="i7w0yj5i6"><li>Credit rating</li><li>Frequency of recent credit inquiries</li><li>Tracking pattern of Days Past Due (DPD) and settlements</li><li>Active credit lines</li><li>Past and active credit frauds</li></ul><h3 class="heading-node" id="rai5qc7qd" style="text-align: left">2.Interlink data points</h3>Interlinking data points associated with risk indicators such as invalid contact numbers, email addresses, or multiple card ownership will help detect irregularities. As per the privacy laws, the sensitive details of consumers need to be stored securely. So, without violating data breach and privacy laws, BNPL players can apply data analytics to gather valuable information on risk indicators, purchasing trends, and behavior.<h3 class="heading-node" id="mk9fouomh" style="text-align: left">3.Look for hidden linkages</h3>Processing BNPL transactions is not a simple task. It involves multiple steps that include linking IP, devices, email, phone numbers, and other details, in order to track and validate a customer. There is a high possibility of hidden linkages in cases that involve multiple names with common phone numbers or email addresses. Machine Learning plays a crucial role in establishing this linkage and sorting out disorders such as delivery address discrepancies and multiple account sign-ins from a single device.<h3 class="heading-node" id="biehsswov" style="text-align: left">4.Check for sudden changes in transaction velocity</h3>Credit risks and fraudulent transactions typically go hand-in-hand. Online frauds can be easily detected when there is a series of unusual high-value transactions taking place at consumer or merchant end. Cybercriminals indulge in this activity by using stolen card credentials to quickly spend the money or even create multiple accounts with fake user details.<h3 class="heading-node" id="sp618e1wg" style="text-align: left">5.Keep a lookout for shady delivery address patterns</h3>When it comes to ecommerce and BNPL, one must never underestimate the power of delivery address tracking in risk mitigation. Machine Learning tools check on delivery address patterns and take risk identification to the next level. With minimal human intervention, ML effectively detects mismatches and erratic patterns in shipping and billing addresses. This data plays a key role in detecting BNPL risks.<h3 class="heading-node" id="2ja7g15xs" style="text-align: left">6.Trust alternate data</h3>Asked to choose between the efficacy of traditional data and alternate data, most leading credit check houses will vouch for the latter. When a customer is credit-invisible, alternate data such as utility bills, rental bills, social media usage, travel history, employment record, and even property ownership come in handy to save the day.&nbsp; Alternate data supplies critical information for AI-based credit decisioning engines to determine a customer’s credit risk. Parameters such as income, nature of expenses, FOIR (Fixed Obligations to Income Ratio), location checks, negative list scrub (for PIN Code, credit check), and merchant data must be prioritized over other data points.<h2 class="heading-node" id="qwunst7q3" style="text-align: left">How we help lenders overcome BNPL risks</h2><a class="link" href="https://m2pfintech.com/blog/fintech-a-catalyst-for-financial-inclusion/">Fintech</a> companies and lenders today are vying to scale up their BNPL offering by investing in in-house technology capabilities and building risk modeling expertise directed toward the automation of credit decisions. A major hiccup here is the exorbitant cost and effort involved in technology upgrades.This is where a 3rd party partnership is required to curb costs and mitigate risks without compromising on customer experience. The collaboration will manage BNPL operations and risk management in totality while you can focus on the core business.Our BNPL Platform is a perfect example of the synergy scenario.&nbsp; We deliver the best risk management strategies for diverse consumer journeys via our loan management &amp; loan origination System. Our credit decision engine hunts and solves credit risks associated with each consumer. Using multiple cutting-edge APIs, we cover New to Bank, New to Credit, and of course existing credit data consumers at the quickest time possible.Our proprietary <a class="link" href="https://m2pfintech.com/blog/the-world-of-apis-how-they-power-fintech/">API</a> stack enables a secure and seamless shopping experience by pairing customer onboarding with a lender credit decision engine. We deliver risk management strategies that cater to Merchants, Lenders, and Fintechs across distribution channels such as card-based pay later, digital payment lines (multiple merchants), and closed-loop lending platforms.Want to know more about how your BNPL program can benefit from our credit decisioning engine?Write to us at business@m2pfintech.com. We’ll be glad to help.<a class="link" href="https://m2pfintech.com/newsletter/">Subscribe</a>&nbsp;to our newsletter and get the latest fintech news, views, and insights, directly to your inbox.Follow us on&nbsp;<a class="link" href="https://www.linkedin.com/company/m2pfintech/mycompany/">LinkedIn</a>&nbsp;and&nbsp;<a class="link" href="https://twitter.com/m2pfintech">Twitter</a>&nbsp;for insightful fintech tales curated for curious minds like you.

Mitigate Credit Risks in BNPL

<img src="https://m2p-website-file.s3.ap-south-1.amazonaws.com/m2p-website-file/marketing-cms/m2p-blog/2022/06/Artboard-1-copy-10-4.webp" alt="M2P Fintech" title="" id="9psuo4qu8" width="100%" height="284">Around the world, there are billions of people without access to structured and formal lending services. This category also includes those micro, small, and medium enterprises that struggle to stay afloat without timely financing.Fintech has identified these segments to be on the brink of a financial revolution, but there is a tiny hitch. For instance,<a class="link" href="https://m2pfintech.com/blog/digital-lending-open-credit-enablement-network/"> digital lending</a> institutions need to regroup their position on mastering the tech, utilizing data in identifying potential borrowers. Nevertheless, some lenders have made some headway in adopting alternative data models resulting in a cutback of credit losses and doubled application approvals.Post-COVID Credit Assessment for Unbanked SegmentThe impact of lending and borrowing on small and medium businesses and informal segments like single structures, migrant populations &amp; the unbanked segment is now seen as “Too risky.”This scenario gives rise to crucial problem statements that need to be addressed by various players in the formal financial ecosystem as below –<ul class="list-node" id="1e9xn2w3x"><li>Lack of structured and verifiable financial behavior data for MSMEs, small retailers, and even single entrepreneur set-ups</li><li>Physical <a class="link" href="https://m2pfintech.com/blog/know-your-customer-kyc-the-need-for-authentication/">KYC</a> verification challenges, especially if the borrower's name details, address, or any other criteria are mismatched against available sources</li><li>The financial inability of MSMEs to service and repay existing Loans (in effect) to avail any of the fresh or emergency credit</li><li>The prevalence of manual processes in risks and credit assessment of lenders and banks increases the chances of fraud, errors, omission, loan data exception, and oversight</li><li>Specifically, in the current scenario, as COVID 19 can be classified as an “ACT OF GOD,” this presents a rare loop-hole challenge for existing borrower data to be improperly / insufficiently benchmarked against existing lending product standards</li><li>One of the most ignored segments is the unbanked and under-banked segment (who can be classified as without an active bank account or a transaction presence for a minimum of 6 months)</li></ul>Credit Assessment Opportunities — Ecosystem Participation<ul class="list-node" id="zp19xq2a4"><li>Alternate scoring entities and solution providers need to capture and capitalize individual data through Telecom, Utilities, Taxation &amp; GST, Payments, E-commerce, and Location data</li><li><a class="link" href="https://m2pfintech.com/blog/account-aggregator-101-democratizing-data-access-and-sharing/">Account aggregators</a> will be a qualitative and quantitative complement disruptor for the credit assessment and provide holistic financial behavior data across participating Financial Information Providers (FIPs) and Financial Information Users (FIUs)</li><li>Credit repair entities will have an essential role in ensuring the impacted segments have access and transparent understanding to repair appropriate credit damage due to COVID</li></ul>So far, these pioneering efforts have sparked the unbanked credit assessment. They have brought forth massive opportunities for the sector, and the future looks promising.Want to know more about enabling digital credit? Then write to us at <a class="link" href="mailto:business@m2pfintech.com">business@m2pfintech.com</a><a class="link" href="https://m2pfintech.com/newsletter/">Subscribe</a>&nbsp;to our newsletter and get the latest fintech news, views, and insights, directly to your inbox. Follow us on&nbsp;<a class="link" href="https://www.linkedin.com/company/m2pfintech/mycompany/">LinkedIn</a>&nbsp;and&nbsp;<a class="link" href="https://twitter.com/m2pfintech">Twitter</a>&nbsp;for insightful fintech tales curated for curious minds like you.

Tag: "Credit Risk (3)"

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