A recent study, the "How Urban India Pays Report 2026," conducted by the Pahlé India Foundation in collaboration with Amazon Pay, highlights a significant shift in financial behavior among urban Indian consumers. The report indicates that a striking 75% of urban Indians have leveraged payment applications for at least one financial product, such as investments, insurance, or credit.
UPI Dominates Everyday Transactions
The Unified Payments Interface (UPI) continues to be the preferred payment method across a broad spectrum of daily expenditures. The survey found that 71% of respondents use UPI for e-commerce purchases. Its usage extends to 54% for dining out and travel, 53% for fuel, transport, medical, and pharmacy expenses, and 49% for groceries. Despite the rise of digital payments, cash remains a dominant choice for rent payments, accounting for 49% of transactions in this category.
Digital Credit Adoption Faces Trust Hurdles
While awareness of digital credit is high, with 88% of respondents familiar with it, actual adoption lags significantly at just 31%. The report identifies trust as a major impediment. Consumers rated their payment apps highly for security (4.11 out of 5) and general payments (3.98), but confidence in credit services dropped to 3.10. A key finding suggests that 51.5% of respondents would consider borrowing through their payment app if robust fraud protection were guaranteed.
Preference for Consolidated Financial Services
A strong consumer preference for a unified financial experience is evident. Over half of the consumers, 52%, expressed a desire for a single application to manage payments, investments, insurance, and credit. An additional 33% indicated they would consider such an app if it offered features comparable to specialized platforms.
Tier-2 Cities Lead Digital Credit Growth
Interestingly, Tier-2 cities demonstrate higher rates of digital credit adoption compared to metropolitan areas. These cities led in Buy Now Pay Later (BNPL) adoption at 60% and credit applications at 41%. Their Digital Credit Inclusion Index score of 58.64 surpassed both Tier-1 cities (53.10) and Tier-3 cities (55.77), indicating a more rapid embrace of digital lending solutions in these regions.
Merchant Perspectives and Challenges
Merchants are largely receptive to digital payments, with 80.6% open to accepting them and 79.5% reporting efficiency gains or increased sales after adoption. However, a significant challenge remains: 72.1% of merchants hesitant about digital payments cited settlement delays as their primary concern, highlighting an area for improvement in the digital payment ecosystem.