How Digital Payments Growth is Unlocking MSME Credit Potential
India’s payment rails are scaling at speed that few markets match. The Reserve Bank of India’s Digital Payments Index reached 493.22 in 2025, up from 465.33 in 2024, signalling deeper digital usage and stronger pipes beneath it.
For lenders, that scale hints at richer, continuous cash-flow signals from small firms. Let us follow this trail: how infrastructure gains reshape finance, how MSME credit demand is shifting, why an access gap persists, and how payments data can help close it.
How Expanding Payment Infrastructure is Reshaping India’s Financial Landscape
The RBI’s composite index captures five levers that matter for digital progress: payment enablers, demand and supply-side infrastructure, performance, and consumer centricity. And recent data captured a rise of 10.7% year on year, with the RBI attributing momentum to stronger supply-side infrastructure and performance.
Moreover, digital payments formed 99.8% of all transaction volume in 2025, with UPI leading everyday payments. Recent reports also note a decade-scale surge in digital activity, and an ecosystem where UPI accounts for 85% of volumes.
A payment rail that is broad, affordable, and always on becomes a data rail. For India’s financial system, that means better visibility into merchant flows, lower frictions in onboarding, and the foundations for credit models that price behaviour rather than paperwork.
Small Businesses, Big Impact: MSMEs as Key Drivers of Lending Demand
MSME lending is no longer a side story in bank books. Recent regulatory data shows MSME credit growth of 14.1% in FY25, outpacing retail and services, and lifting the MSME share of bank credit to 17.7% by mid-2025. Asset quality also improved, with lower NPAs in MSME portfolios.
For lenders, this creates a twin advantage. Demand is expanding in a segment that touches every supply chain, and digital payment adoption is rising within that same segment. Institutions that connect transaction trails to underwriting can grow prudently while aligning products to business cash cycles.
The Disconnect between MSME Importance and Credit Availability
However, scale has not erased the access gap. Industry experts estimate an MSME credit shortfall of INR 20-25 lakh crore, with only about 20% of enterprises accessing formal finance today. Even where invoice discounting channels exist, penetration remains modest relative to need, and adoption depends on buyer onboarding and process readiness.
This friction shows up in working capital delays and a continued reliance on costlier informal sources. The message for lenders is clear. Traditional collateral-first frameworks miss viable borrowers whose proof of performance lives in GST filings, bank statements, and payment receipts rather than land records or lengthy financials.
Digital Payments Growth as a Bridge to MSME Credit Access
A payments-dense economy produces decision-grade footprints. DPI signals, paired with other rails, reveal revenue cadence, seasonality, and customer concentration for small firms in near real time.
Moreover, the Account Aggregator framework is now operating at national scale with 780+ financial institutions on network and 269+ million consent artefacts processed, enabling secure, consented data flows that compress underwriting timelines, including for MSMEs.
Turning this pipe into credit needs purpose-built solutions. ScoreMe supports cash flow and GST-based underwriting through analyzers for bank statements, GSTR, ITR and 26AS, plus financial statement and bureau insights, all delivered through configurable rules and straight-through processing.
Lenders can stitch these feeds into scoring, monitor post-disbursement health, and align repayment to cash patterns, which is critical for thin-file MSMEs. Put together, the path is practical. Use payments and consented data to see the business as it runs, price risk on behaviour, and speed approvals without compromising controls.
Institutions that adopt this approach can extend prudent credit at scale and help narrow the MSME gap that headline figures continue to spotlight.