75% of urban Indians have used at least one financial product through their primary payment app
51.5% would borrow through the app if a guarantee against unauthorised transactions were provided
77% spend at least 50% more during the festive season; Fashion & Beauty (89%) tops on volume, Consumer Electronics on value
Gig workers: 23% turn first to a digital loan app in a cash crunch, 3.4X the national rate
Tier-3 merchants lead digital-payments enthusiasm — 4 in 5 report efficiency gains
Pahlé India Foundation today released the How Urban India Pays Report 2026 in collaboration with Amazon Pay. Based on a survey of 5,149 consumers and 1,054 merchants across 100 cities in 20 states, the report finds that digital payments have become an everyday habit, with UPI leading in five of six spending categories. Three in four (75%) urban Indians have used at least one financial product within their payment app — yet this confidence has not extended equally to digital credit, where awareness is high (88%) but usage remains low (31%).
To quantify this divide, the report introduces the Digital Credit Inclusion Index (DCII) 2026 – India’s first composite benchmark providing a comprehensive view of the country’s digital credit journey. The index gives India an overall score of 55.85 out of 100, placing it in the “Emerging & Served” category (51-75). The DCII measures three core pillars – Access (61.24), Adoption (57.17) and Impact (49.16), highlighting that while digital credit is within reach for most urban Indians, its broader financial impact remains limited.
At the consumer level, the impact shortfall is rooted in trust: users rate their payment apps highly for security (4.11/5) and for payments (3.98/5), but confidence drops to 3.10 when the same app offers credit. The gap looks solvable: 51.5% say they would borrow through their app if fraud protection were guaranteed, versus just 16.7% who would still decline.
“India’s digital payments revolution is one of the more remarkable achievements of our development journey. In less than a decade, UPI has moved from novelty to reflex, and urban India now pays digitally as a matter of habit. Having built this foundation of trust-based efficiency at scale, India is now ready for its next leap: extending the confidence earned in payments to borrowing, saving and investing. With transparent disclosure, robust cybersecurity and safety, and underwriting that recognises informal incomes, digital finance can reach every Indian and make a meaningful contribution to the goal of Viksit Bharat @ 2047,” said Dr Rajiv Kumar, Chairman, Pahlé India Foundation.
Vikas Bansal, CEO, Amazon Pay India, said, “What stands out this year is how confidently urban India is adopting digital credit to manage everyday finances. Consumers are increasingly turning to BNPL and EMI options not just for big-ticket purchases, but as practical tools to spread costs, stay within budget and make aspirational purchases more accessible. At Amazon Pay, we see this shift first-hand, with 75% of our customers in Tier-2 and Tier-3 cities. Our focus is on making credit simple, transparent and relevant so that every customer can plan better, spend smarter and fulfill their aspirations with confidence.”
KEY FINDINGS
From Payment App to Financial Companion
The appetite for consolidation is strong: 52% would prefer a single app for payments, investments, insurance and credit, while another 33% would consider it if the app matched dedicated platforms feature-for-feature.
Digital Payments Are Now Everyday Habit
UPI is the most-used payment method: 71% use it for e-commerce, followed by eating out and travel (54%), fuel and transport (53%), medical and pharmacy (53%), and groceries (49%).
Festive Season Drives a Spending Surge
77% of respondents spend at least 50% more than usual during the festive season — 46% report spending 1.5–2× their regular budget, while 6% spend more than three times as much. At a city level, Rajkot and Ahmedabad record the highest shares of respondents spending three times or more, while Jaipur stands out with 88% spending at least double their usual budget. Consumer Electronics and Home Appliances account for the highest-value purchases, while Fashion & Beauty leads in purchase volume (89%), followed by Home & Kitchen (87%) and Everyday & Grocery (84%).
Tier-2 Cities Lead the Digital Financing Charge
Tier-2 cities emerge as the next growth engine for digital credit, with usage higher than in metros across every product measured. Tier-2 leads BNPL (60%) and credit applications (41%), with a Digital Credit Inclusion Index (DCII) score of 58.64 that exceeds both Tier-1 (53.10) and Tier-3 (55.77). City-level data reveals sharp differences: Coimbatore records the highest use of instalment financing for electronics and appliances at 70% — nearly 10X 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 Show Strong Digital-Credit Appetite
Gig workers combine high digital-finance engagement with clear unmet credit need: 67.5% use UPI Lite regularly, 23% would turn first to a digital loan app in a cash crunch (3.4X the national norm), and 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, reflecting the challenge of assessing irregular incomes through conventional underwriting.
Senior Citizens Are More Digitally Confident Than Expected
55% of senior citizens say digital payments make them feel confident and independent, and nearly half (49%) say their digital-payment use has become a regular habit over the past year.
Merchants Want Digital Payments, but Faster Settlements
Among merchants surveyed, 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, the issue is cash flow: 72.1% of hesitant merchants cite settlement delays as their primary concern.
Five ‘Money Minds’ Shape Urban India
The study identifies five financial personas: Planners (41%), Savers (33%), Survivors (15%), Impulse Spenders (7%) and Confident Borrowers (4%). Nearly three in four consumers identify as Planners or Savers. Survivors — characterised by greater caution around credit and a stronger reliance on savings and family — represent about one in seven, highlighting the importance of designing financial products around different consumer behaviours.
Thus, the How Urban India Pays Report 2026 highlights the growing role of digital payments and payment apps in shaping India’s financial landscape, with Tier-2 cities emerging as key drivers of digital-credit adoption. As consumers increasingly look to payment apps for a wider range of financial services, the next phase of growth will depend on building the trust needed to translate access into meaningful financial participation. Strengthening fraud protection, improving transparency and developing credit solutions that account for diverse income patterns will be critical to ensuring that the benefits of digital finance extend to more Indians.
