Payment Apps Eye India's Next Credit Boom as Consumer Trust Gap Persists

Bengaluru, Oct 13 : India's digital finance industry is looking beyond payments to drive its next phase of growth, but expanding digital credit adoption remains a challenge amid persistent consumer trust concerns, according to a report by Pahle India Foundation in collaboration with Amazon Pay.

The report, How Urban India Pays 2026, found that while 88 per cent of urban consumers were aware of digital credit, only 31 per cent had used it. At the same time, 75 per cent had accessed at least one financial product through their primary payment app, highlighting the potential for digital platforms to expand their financial services offerings.

The findings reveal a significant gap between consumers' confidence in digital payments and their willingness to borrow through apps. Respondents rated payment apps 3.98 out of five for payments and 4.10 for security, but their confidence dropped to 3.10 when the apps offered credit.

About 51.5 per cent of respondents said they would be willing to borrow through an app if protection against unauthorised transactions was guaranteed. However, 16.7 per cent said they would still decline, indicating that security assurances alone may not be sufficient to encourage wider adoption.

The Digital Credit Inclusion Index stood at 55.85 out of 100, placing India in the "Emerging and Served" category. While access scored 61.24 and adoption 57.17, the impact score was lower at 49.16, suggesting that access to digital credit has yet to translate fully into perceived benefits for consumers.

Smaller cities are emerging as significant markets for digital credit. Tier-2 cities recorded an index score of 58.64, ahead of Tier-3 cities at 55.77 and metropolitan areas at 53.10. Buy-now-pay-later (BNPL) adoption in Tier-2 cities stood at 60 per cent, while 41 per cent of respondents had applied for credit.

The report also highlighted disparities in access across occupational groups. Informal earners, including gig workers, daily-wage workers, homemakers, students and unemployed individuals, scored around 11 points lower on the index than salaried employees and business respondents.

Among gig workers, 67.5 per cent regularly used UPI Lite, while 23 per cent said they would turn to a digital loan app first during a cash crunch. About 43 per cent reported that digital credit had increased their financial independence.

"Digital payments have transformed from a novelty to a habit in less than a decade," said Pahle India Foundation Chairman Rajiv Kumar. He added that the next phase of growth would require greater transparency, stronger cybersecurity and lending systems capable of recognising informal incomes.

Amazon Pay India CEO Vikas Bansal said consumers were increasingly using BNPL and equated monthly instalment (EMI) options to manage expenses and make aspirational purchases.

The report found that 52 per cent of respondents preferred a single app offering payments, investments, insurance and credit. Another 33 per cent said they would consider such an option if it could match the services provided by dedicated platforms.

Festive spending also remained robust, with 77 per cent of respondents saying they spent at least 50 per cent more during the festive season.

Among merchants, 79.5 per cent reported improvements in operational efficiency or sales through digital payments. However, settlement delays continued to be a major concern among merchants hesitant to adopt digital payment solutions.

The findings underscore the opportunities for payment platforms to expand into digital lending, while highlighting the need to build consumer confidence, improve credit accessibility and ensure that digital borrowing delivers tangible financial benefits.