‘Bureau credit scores should not be the sole filter’

Founded in 2011, IDfy is an identity verification platform to eliminate fraud, establish trust, and fulfil the need for security and compliance. With the central bank tightening underwriting standards, evaluation of customers can no longer rely only on credit bureau scores.

- Ashok Hariharan, founder of IDfy, interacted with Raghu Mohan via email on issues in retail onboarding and underwriting. Edited excerpts:

Do you think traditional underwriting is failing new-to-credit (NTC) borrowers?

■ In my view, it does not serve NTC borrowers well. It still leans heavily on bureau scores, which only reward those who already have a credit history. For first-time applicants, this becomes an exclusion filter. We see this reflected in the data: less than 18 per cent of new loan originations in 2024 went to NTC borrowers, down from 25 per cent the previous year. In unsecured loans, the share is even lower, around 10 per cent, and drops further for higher ticket sizes. This hurts precisely the segment that needs access most: young professionals and startup employees who may have strong financial potential, but no track record. The paradox is stark: India’s most digital generation, with rich online financial footprints, is also the most excluded from formal credit.

If credit bureau scores are not to be taken as the sole indicator for NTC, what are the other reasonable evaluation parameters?