DPDP will rewire how India lends. Here’s how

The pattern #180

DPDP will rewire how India lends. Here’s how

Mayank Jain

Head - Marketing and Content

Nov 21, 2025

Welcome to the 180th edition of The Pattern, a weekly where we dive into the latest from the world of economy, finance and technology. Let’s get started.

DPDP: The big reset

India is known for leapfrogs. Whether it is our leapfrog from landlines to 5G or our recent leapfrog from cheques to instant payments through UPI – our digital ecosystem is the envy of the world. However, the trouble with leapfrogs is that regulations are always left playing catch-up.

We live in a post-JAM (Jan Dhan, Aadhaar and Mobile) world where data highways siphon high-quality and credible information across personal, financial, transactional and even tax and compliance at warp speed. However, while this trinity has been around for more than a decade, it’s only now that we got the first comprehensive digital data protection law.

It’s been decades in the making. It was scrapped at least twice. It made policy makers have eggs on their face when they couldn’t get it to pass the Parliament. But now, it’s finally here. And it’s more than just a set of compliance checklists, it’s a deep rewire of the Indian digital ecosystem and especially momentous for the financial services industry.

Here’s my submission – DPDP Act will not only level the BFSI playing field but also change the rules of the game so profoundly that even the best companies will have to work harder to earn consumer trust in a consent-first world.

1.Lenders must move from “harvesting” data to conversing with it

The infamous practice of data hoarding in the financial services space is set to finally be curbed. Lenders are notorious for collecting vast amount of data in the name of KYC, onboarding and documentation when sanctioning a simple loan or opening a new bank account. DPDP will restrict unnecessary collection of data and force lenders to trim their data requirements.

This is likely to not just reduce noise from underwriting models but also train them for sharper and more precise insights that could lead to more predictable underwriting outcomes. Another way this could help lenders is that they could see overall conversion rates improve because borrowers exit onboarding journeys when they seem to ask for more data, as documented in this FinBox study.

Good times.

2. Consent becomes a differentiator, not a legal formality

The second most important change will be that consented use of data and transparency will move on from being buzzwords to real differentiators in the space. As the awareness about data usage, storing and processing rises, consumers will disproportionately reward lenders that are transparent about their data collection practices.

Consent-based journeys, hence, will not just be checkbox but a clear moat that could help lenders win new customers and markets with ease. Building a compliance-first product that’s also delightful, however, it is a task for cutting-edge infrastructure that must be retooled in the new era.

3.DPDP quietly kills the “spray-and-pray” cross-sell machine

What do you do when you have loads of data? You start finding patterns that don’t exist or correlations that aren’t causations. This is what is happening right now in the financial services industry. Lenders put together their reams of data and run large “spray-and-pray" campaigns across their customer base in the hope to cross-sell or up-sell even more credit products.

This effectively should end with DPDP in place because data usage limitations will kick in. As a result, lenders will have to narrowly define data usage terms when collecting this data – thus, disabling the side door of collecting a lot of data and then using it for purposes other than sanctioning that one specific loan that the customer has applied for.

The next generation lender will run:

Opt-in based cross-sell
Context-aware credit offers
High-precision, event-triggered journeys
Customer-trust-based expansion instead of funnel-abuse

This tilts power towards:

API-based integrations
First-party transaction intelligence
Risk engines driven by real-time signals

4.DPDP is actually an underwriting advantage disguised as a regulation

Underwriting prowess improves exponentially when there’s less noise and more signal. DPDP will force lenders to collect high-signal vectors only. These could include – financial profiles, income stability signals, delinquency reports, device integrity, fraud vectors and more.

With these signals, lenders must run high-precision underwriting models that take full advantage of lesser-but-sharper data to generate insights that prove useful beyond just go/no-go decisioning.

Savvy lenders will adopt modern underwriting platforms to transform their decisioning, risk modelling, pricing and even customer service basis these signals.

5.The biggest impact: DPDP rewires trust, UX, and credit — simultaneously

The bottom line is this – DPDP is set to be more transformative, holistic and comprehensive overhaul of the digital credit ecosystem than most other things that have come before.

While central bank regulations often only impact one area or the other, DPDP will transform product, consumer experience, credit delivery and decisioning all at once.

As products move to a consent-first design, consumers will find new trust in lenders. At the same time, UX will be governed by consent, privacy and “need to know” collection of information. All of this will lead to data-driven credit decisioning and explainable policy decisions that, at the end of the day, will keep the regulators, the lender and most importantly, the borrowers, very happy.

PS: One of my ex-colleagues would always say, “there are two kinds of companies, ones who know the law and the others who know the law minister.”

DPDP, if enforced well, could change this forever. Lenders who treat it as a compliance checklist will fall by the wayside while those who use this opportunity to transform the entire product ecosystem to build trust among their borrowers will race ahead.

This is all for this week. I will see you in the next one.

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