At a time when India’s digital lending ecosystem is undergoing rapid transformation, Santosh Agarwal, CEO, Paisabazaar believes technology, AI and responsible lending will define the next phase of BFSI growth. In our interaction, she speaks about AI-led underwriting, evolving consumer credit behaviour, cybersecurity, financial inclusion and why sustainable growth and customer trust must remain at the core of the fintech ecosystem.
Excerpts of her interview:
Q: How do you see the BFSI landscape evolving over the next 2-3 years, especially with AI, embedded finance and account aggregator frameworks gaining traction?
Santosh Agarwal: We are at an exciting stage, with the rise of AI and the endless possibilities it brings on one side and a massively under-penetrated consumer credit market on the other. While the financial services industry is typically more circumspect in adaption of new technologies at scale, the use of AI in every aspect—from underwriting to origination to collections—is inevitable.
Traditionally, lending has been restricted to limited segments, but progressive steps and innovations by the regulator and the industry over the last few years should bring unprecedented efficiency, inclusiveness and democratize lending. We should start witnessing formal credit reaching underserved markets, from small business owners to first-time borrowers to individuals in tier 3 and 4 towns.
Q: As unsecured lending segment witnesses rapid growth and regulatory tightening, what are you doing to balance growth with responsible lending and risk management?
Santosh Agarwal: After the regulator had to step in to moderate the super-natural growth in unsecured lending post-Covid, the industry started focusing on only sustainable growth. At Paisabazaar, we are very clear: we do not want any tactical wins that go on to hurt us in the long-run or lead to poor customer experience. We are very happy to take short-term revenue loss for long-term growth.
For instance, we have been working very closely with lenders to help improve the quality of their books. A strategic initiative aimed at adding genuine value to the ecosystem is our responsible lending mechanism. One of the core aspects here is to pre-filter loan applicants with a high chance of early delinquency. Our risk score filter acts as a risk gate at the pre-decisioning stage, intercepting and de-prioritising high-risk profiles.
This rejected cohort of consumers we saw has a three-fold higher six-month delinquency, compared to the baseline approved population. Due to this, we now reject 8 per cent of lender-approved applicants, which has led to a 10 per cent impact on our disbursal volumes. While it has a short-term business impact, it not just improves underwriting confidence of partner banks but also helps create cleaner portfolios with lower acquisition leakage.
Q: Consumer credit behaviour in India is changing rapidly, particularly among younger borrowers. What are some of the biggest shifts visible in customer expectations and borrowing patterns?
Santosh Agarwal: There is a clear comfort and confidence in using credit, especially among the younger segments. The use of credit is no longer restricted to need, it’s part of the lifestyle. A research study by us showed that the age of consumption of first credit is coming down drastically with each generation.
For instance, individuals born in the 1960s typically accessed their first credit product at 47, while those born in the 1990s began at 25–28 years. There is also a clear expectation of instant and seamless delivery of financial services, a behaviour shaped by quick commerce. I think the industry has to focus on both — ensuring lending is responsible but access is seamless.
Q: How is Paisabazaar leveraging technology and data to help consumers make more informed financial decisions rather than merely facilitating product sales?
Santosh Agarwal: I think, as an industry, we need to move to the next stage – from building awareness to deepening understanding and strengthening offers. As per our consumer research report while 98 per cent of borrowers know what a credit score is, only 7 per cent truly understand how it impacts their eligibility. Closing this gap is key for consumers and the lending ecosystem.
As a marketplace, we are focusing sharply on ensuring that offers on our platform are more accurate and meaningful for consumers, ensuring certainty.
To cater to more segments and make our platform stronger, we have also sharpened our focus on enhancing supply through deep and wide partnerships across the ecosystem.
Q: There's increased focus on transparency, digital consent architecture and customer protection by regulators now-a-days. In such a scenario, how has the compliance environment changed for fintech platforms and digital marketplaces?
Santosh Agarwal: The compliance environment has been evolving, which is both necessary and healthy.
Financial services operate on trust. As digitization scales rapidly, cybercrime and digital frauds are a grave reality that needs constant attention from fintechs and the industry. Today, there is far greater emphasis than ever, and rightly so, on data security, explicit customer consent, transparency and responsible practices.
Fintechs may view compliance as something that slows them down, but over the long run, it helps build strong consumer trust, healthy partner relationships and resilient platforms. Fintechs that prioritise transparency and positive consumer outcomes while being strong on compliance will emerge stronger and more durable over time.
Q: India’s credit ecosystem is now expanding into Tier-II and Tier-III cities. What trends do you observe in terms of financial product adoption and credit demand from these regions?
Santosh Agarwal: A very significant portion of the credit demand is coming from smaller cities and towns. At Paisabazaar, we get enquiries from over 1,000 cities across India every month. This demand comes from digital-savvy and aspirational segments that have no qualms in using credit for everyday or lifestyle spends.
While this augurs well for credit growth, we as an industry need to take stronger measures to drive greater awareness around responsible borrowing and financial discipline. Helping consumers understand affordability, repayment obligations and prudent credit usage will be critical to ensuring long-term financial health and preventing over-leveraging.
Q: What are the most meaningful use cases of AI that you believe will redefine the lending ecosystem?
Santosh Agarwal: AI will reshape financial services and lending as we know it today. While the onus will be on the industry regarding how quickly they adapt, I see AI will deeply influence three areas.
One, AI can expand the realm of formal credit exponentially. New underwriting models built on AI frameworks using transaction data along with digital footprints can unlock access to credit for millions of underserved consumers – from small shopkeepers to first-time borrowers. AI can play a key role in delivering more personalized and accurate offers and also significantly enhance the borrowing experience.
AI surveillance can also help detect early signs of financial stress and can be instrumental in building stronger credit portfolio monitoring practices for lenders, helping improve the quality of books over the long run.
Another use case would be fraud detection. There is realization within the industry for the need to build a strong and constantly evolving anti-fraud ecosystem built on cutting-edge technology to negate modern frauds.
Q: Data privacy and cybersecurity are a challenge to fintech companies as financial services go digital. How is Paisabazaar strengthening trust and ensuring responsible use of customer data?
Santosh Agarwal: Responsible lending in the digital age requires more than intelligent algorithms. Paisabazaar, for instance, processes over 4 billion monthly hits and serves 60 plus million visitors while maintaining seamless performance across petabytes of data. We have multi-layered cybersecurity architecture, including Paisa Shield — our proprietary fraud detection system that monitors millions of data points in real-time using AI. The system employs dynamic risk scoring models that continuously learn from new fraud patterns and adapt their detection algorithms accordingly.
Recognising the potential risks of AI systems, we have also implemented an in-house LLM orchestration layer that enforces strict governance over the AI operations.
Q: The insurance distribution ecosystem is witnessing rapid digitisation. So, do you see any convergence happening between lending, insurance, wealth and broader personal finance platforms in the future?
Santosh Agarwal: The future belongs to integrated platforms that offer a unified experience and seamlessly manage multiple personal financial needs rather than through fragmented journeys.
At Paisabazaar, over the last year, we have been building a financial wellness platform for the future.
While lending remains the core, we are seeing great traction in our offerings around corporate bonds, fixed deposits, mobile recharge and bill payments. We are focused on building a holistic platform — helping consumers make informed decisions across credit, savings, investments and overall financial health.
India’s future financial platforms would be built on consumer experience, trust and long-term customer engagement, whose intelligence would be powered by strong digital rails, the new data ecosystem and cutting-edge technologies.
Q: You are leading one of India’s largest financial marketplaces. What do you believe will define the next phase of growth for the country’s BFSI sector — technology innovation, regulatory evolution, customer trust or deeper financial inclusion?
Santosh Agarwal: There is little doubt that technology will be at the forefront. I think the key factor would be how quickly the industry adapts. Historically, we have seen financial services has been cautious and takes a few years for innovations to scale and mature. AI and future technologies are here to usher in a new era. The question is how receptive we would be as an ecosystem to these transformations.
I believe AI along with India’s world class digital public infrastructure can pave the way for a decade of strong and inclusive growth for consumer credit.
