75% of Urban Indians Use Payment Apps for Finance, Yet Credit Gap Remains
A new report reveals 75% of urban Indians use payment apps for finance, yet trust issues keep credit adoption low at just 31%.
A significant shift is occurring in how urban Indians manage their money. According to the How Urban India Pays Report 2026, released by the Pahlé India Foundation in collaboration with Amazon Pay, three out of four urban Indians—approximately 75 per cent—have utilized at least one financial product through their primary payment application.
While the Unified Payments Interface (UPI) has made digital payments a daily habit, a stark contrast exists between how people pay and how they borrow. Despite high awareness levels, the actual adoption of digital credit remains surprisingly low.
The Digital Credit Inclusion Gap
The report introduces the Digital Credit Inclusion Index (DCII) 2026, which places India in the "Emerging & Served" category with an overall score of 55.85 out of 100. The index evaluates three core pillars: Access, Adoption, and Impact.
- Access: 61.24
- Adoption: 57.17
- Impact: 49.16
The lower score in the "Impact" category is largely attributed to a lack of trust. While users feel secure when making payments—rating applications 4.11 out of 5 for security—that confidence drops significantly when it comes to credit, with trust levels falling to 3.10.
The Trust Deficit and Fraud Concerns
The study highlights a massive opportunity for the fintech sector. While current usage of digital credit stands at only 31 per cent, the appetite for it is there if security concerns are addressed. Specifically, 51.5 per cent of respondents stated they would be willing to borrow through their apps if fraud protection were guaranteed. Conversely, 16.7 per cent of respondents would still decline to use digital credit regardless of protections.
Rajiv Kumar, Chairman of the Pahlé India Foundation, noted that UPI has transitioned from a novelty to a reflex in less than a decade. He emphasized that India is now poised for its next leap: extending the trust built in payments to borrowing, saving, and investing. He suggested that transparent disclosure and robust cybersecurity are essential to achieving the "Viksit Bharat at 2047" objective.
Tier-2 Cities Leading the Credit Charge
Interestingly, the report finds that metropolitan hubs are not the primary drivers of credit uptake. Instead, Tier-2 cities are outperforming Tier-1 and Tier-3 locations. These cities lead in the use of Buy Now Pay Later (BNPL) at 60 per cent and credit applications at 41 per cent, earning a DCII score of 58.64.
Vikas Bansal, Chief Executive Officer of Amazon Pay India, observed that urban consumers are increasingly using digital credit to manage routine expenses. "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," Bansal said. He noted that Amazon Pay sees this shift firsthand, with 75% of their customers located in Tier-2 and Tier-3 cities.
Merchant Challenges
The report also looked at the merchant side of the digital economy. While 80.6 per cent of merchants are open to digital payments, many still face hurdles. For the 72.1 per cent of hesitant sellers, the primary challenge identified was settlement delays.