While 88% of urban consumers are aware of digital credit, only 31% actually use it, according to the How Urban India Pays Report 2026 by Amazon Pay and Pahlé India Foundation. The report, based on a survey of 5,149 consumers and 1,089 merchants across 100 cities in 20 states, reveals that digital credit remains underutilized despite widespread awareness. India scored 55.85 out of 100 on the Digital Credit Inclusion Index 2026, placing it in the "Emerging and Served" category with scores of 61.24 for access, 57.17 for adoption and 49.16 for impact.
Tier-2 cities demonstrate higher digital credit adoption than metros across all product categories. According to the report, they lead in buy now, pay later (BNPL) usage at 60% and credit applications at 41%. Coimbatore records the highest use of instalment financing for electronics and appliances at 70%, nearly 10 times the national norm, while Kochi follows at 45%. The Digital Credit Inclusion Index score of 58.64 for Tier-2 cities exceeds those of Tier-1 cities (53.10) and Tier-3 cities (55.77).
The report reveals that 75% of urban Indians have used at least one financial product - investments, insurance or credit - within their payment app. UPI leads in five of six spending categories with 71% of respondents using it for e-commerce, followed by eating out and travel (54%), fuel and transport (53%), medical and pharmacy (53%), and groceries (49%). Cash continues to dominate rent payments at 49%, while 52% of consumers would prefer a single app for payments, investments, insurance and credit, with another 33% considering it if it matched dedicated platforms feature for feature.
The report identifies trust as the primary barrier to digital credit adoption, with users rating payment apps highly for security (4.11 out of 5) and payments (3.98 out of 5), but confidence dropping to 3.10 when the same app offers credit. 51.5% of respondents say they would borrow through their app if fraud protection were guaranteed, compared with just 16.7% who would still decline. This gap appears solvable, suggesting that addressing security concerns could significantly increase digital credit adoption.
Festive-season spending shows significant increases, with 77% of respondents spending at least 50% more than usual. 46% spend 1.5 to 2 times their regular budget, while 6% spend more than three times as much. Consumer electronics and home appliances account for the highest-value purchases, while fashion and beauty lead in purchase volume at 89%. Among merchants surveyed, 80.6% are open to digital payments, with 79.5% reporting efficiency or sales gains since adopting them. Tier-3 merchants show the most enthusiasm with 66.4% describing themselves as "extremely open" to digital payments.
