Across India, thousands of small retailers rely on informal credit from suppliers. They get stock on trust, repay within days, and repeat the cycle every week. Despite this consistency, their credit scores remain low, often stuck between 550 and 580. That number blocks access to credit cards, term loans, and working capital products offered by financial institutions.

The problem isn’t repayment behaviour. It’s visibility. Their financial discipline goes unrecorded. When one digital platform started exploring credit options for these users, they found that strong purchase and repayment patterns didn’t translate into formal creditworthiness. That gap became the opportunity.

The approach was simple: track what already works. The platform structured credit lines that mirror existing habits, viz., short-term, high-trust, fast-repayment, and linked them to formal credit reporting. Every repayment counted. Customers could build credit scores by changing behaviour and doing what they already did on record.

As the model matured, customers who started with low scores saw their ratings climb. Some went from denied credit card applications to qualifying for higher-limit lines within months. When behaviour is measured, it’s rewarded.

Credit Built Into The Transaction

Applying for credit used to mean paperwork, waiting, and uncertainty. That doesn’t work for retailers restocking twice a week. A better system integrates credit into the buying process itself. Not as a separate workflow, but as another way to pay, just like UPI, cash, or card.

Several commerce platforms now offer credit lines directly on their checkout screens. Users can select credit at the point of sale, repay through their app or a partner dashboard, and continue purchasing without added steps. These lines typically range from ₹50,000 to ₹5,00,000 and are usable only within the platform’s ecosystem.

This closed-loop model benefits everyone involved. For the retailer, there’s no need to manage multiple debts or chase approvals. For the platform, it reinforces engagement and improves order frequency. For the financial partner, risk is easier to assess and control. Over time, the loop creates consistent transaction data that supports both lending and inventory planning.

Instead of placing fewer large orders, retailers begin placing smaller orders more often. Data shows most users don’t max out their limits. They use around 60% of the available credit but rotate it frequently. This improves cash utilisation and stock variety, while keeping repayment manageable.

Data Over Scores

Traditional credit systems rely on limited data. Small business owners without formal records are flagged as high-risk by default. But platforms that process thousands of transactions a day see something different. They see patterns: on-time payments, repeat purchases, and low return rates. This kind of data tells a more accurate story than a single score ever could.

That story has financial value as well. As repayment data increases, credit terms improve, and delinquencies fall. The cost of issuing credit drops. Retailers who start with a ₹30,000 limit and no score can grow into ₹7 lakh lines with verified repayment history, sometimes in under a year.

Trust matters too. While some expect users in smaller cities to hesitate with digital credit, experience suggests otherwise. These retailers already manage daily finances carefully. They understand credit. What they need is clarity: how it works, what it costs, and how to use it. When those boxes are checked, uptake is strong.

Roughly four out of ten eligible retailers now use credit on these platforms, but they drive over half the total order volume. That suggests significant room for growth. As GST data becomes more available and digital records deepen, more businesses will qualify automatically, without ever needing to apply. Credit isn’t just about buying more. It’s about building a financial footprint. For many small retailers, embedded credit has become their first step into formal finance. Once inside, they gain access to better tools, better terms, and more control. That changes what they can do. Not just this week, but long-term.

Dinkar Ayilavarapu is Vice President and Head of Flipkart Wholesale.