Three in four urban Indians have used a financial product in their payment app, but only 31% use digital credit, a new survey finds
Digital payments have become a reflex for urban India, but the confidence earned in paying has not yet carried over to borrowing. That is the central finding of 'How Urban India Pays Report 2026', released by Pahlé India Foundation in collaboration with Amazon Pay. Based on a survey of 5,149 consumers and 1,054 merchants across 100 cities in 20 states, it suggests payment apps are poised to become broader financial companions, provided they close a trust gap.
UPI leads in five of six spending categories. It is used by 71% of respondents for e-commerce, 54% for eating out and travel, 53% each for fuel and transport and for medical and pharmacy spending, and 49% for groceries. Three in four (75%) urban Indians have used at least one financial product within their primary payment app.
The appetite for consolidation is strong. About 52% would prefer a single app for payments, investments, insurance and credit, and another 33% would consider it if the app matched dedicated platforms feature for feature.
Awareness of digital credit is high at 88%, but usage is only 31%. To measure the divide, the report introduces the Digital Credit Inclusion Index (DCII) 2026, described as India’s first composite benchmark. India scores 55.85 out of 100, in the “Emerging & Served” band of 51 to 75. Of its three pillars, Access scores 61.24, Adoption 57.17 and Impact 49.16, meaning digital credit is within reach for most urban Indians but its broader financial effect remains limited.
The shortfall is rooted in trust. Users rate their payment apps 4.11 out of 5 for security and 3.98 for payments, but confidence falls to 3.10 when the same app offers credit. The gap looks solvable: 51.5% say they would borrow through their app if it guaranteed protection against unauthorised transactions, while only 16.7% would still decline.
Dr Rajiv Kumar, chairman of Pahlé India Foundation, said the next step is to extend confidence from payments to borrowing, saving and investing, through transparent disclosure, strong cybersecurity and underwriting that recognises informal incomes. Vikas Bansal, CEO of Amazon Pay India, noted that consumers increasingly use BNPL and EMI options to spread costs and stay within budget, not only for big-ticket purchases. He said 75% of Amazon Pay’s customers are in Tier-2 and Tier-3 cities.
Tier-2 cities lead the way
Tier-2 cities emerge as the growth engine for digital credit, with usage higher than in metros across every product measured. They lead on BNPL (60%) and credit applications (41%), and their DCII score of 58.64 is above both Tier-1 (53.10) and Tier-3 (55.77).
City-level data shows sharp differences. Coimbatore records the highest use of instalment financing for electronics and appliances at 70%, nearly ten times the national norm, followed by Kochi at 45%. Surat, Bengaluru and Chandigarh show the strongest BNPL adoption for fashion, while Mumbai’s festive shopping is dominated by credit cards.
Gig workers: strong appetite, weak underwriting
Gig workers combine high digital engagement with clear unmet credit need. About 67.5% use UPI Lite regularly, and 23% would turn first to a digital loan app in a cash crunch, which is 3.4 times the national norm. Some 43% say digital credit has increased their financial independence.
Yet informal earners, including gig workers, daily-wage workers, homemakers, students and the unemployed, score about 11 points below salaried and business respondents on the DCII. The report attributes this to the difficulty of assessing irregular incomes through conventional underwriting.
Festive spending surge
Festive seasons drive a large jump in spending. About 77% of respondents spend at least 50% more than usual, 46% spend 1.5 to 2 times their regular budget, and 6% spend more than three times as much. Rajkot and Ahmedabad have the highest shares of people spending triple or more, while Jaipur stands out with 88% spending at least double.
Consumer electronics and home appliances account for the highest-value purchases. Fashion and beauty leads on volume (89%), followed by home and kitchen (87%) and everyday and grocery (84%).
Merchants and senior citizens
Among merchants, 80.6% are open to digital payments and 79.5% report efficiency or sales gains since adopting them. Tier-3 merchants are the most enthusiastic, with 66.4% describing themselves as “Extremely Open”, ahead of Metro/Tier-1 (64.3%) and Tier-2 (51.7%). Where hesitancy remains, cash flow is the issue: 72.1% of hesitant merchants cite settlement delays as their main concern.
Senior citizens are more digitally confident than might be expected. About 55% say digital payments make them feel confident and independent, and 49% say their use has become a regular habit over the past year.
Five ‘money minds’
The study identifies five financial personas: Planners (41%), Savers (33%), Survivors (15%), Impulse Spenders (7%) and Confident Borrowers (4%). Nearly three in four consumers are Planners or Savers. Survivors, who are more cautious about credit and rely more on savings and family, represent about one in seven, which the report says shows the need to design products around different behaviours.
The report says that the next phase of growth depends on turning access into meaningful financial participation. That means stronger fraud protection, clearer disclosure and credit products that account for varied income patterns. If payment apps can earn in lending the trust they have won in payments, digital finance could reach far more Indians, with Tier-2 cities and informal workers likely to lead the way.
