India's Credit Shift: One-Third of Digital Payments in 2024 Are Credit-Driven
Introduction: India’s Digital Payment Boom Evolves
India’s digital payment ecosystem has undergone a revolutionary transformation over the past decade. From the introduction of UPI (Unified Payments Interface) to the widespread adoption of mobile wallets and digital banking, the shift to a cashless economy has been swift and impactful. In 2024, the nature of these digital transactions is undergoing yet another evolution — one that underscores a deeper behavioral shift among Indian consumers.
According to a new report by digital payments fintech Phi Commerce, nearly one-third of all domestic digital transactions in 2024 were credit-driven. This includes payments made via credit cards and interest-bearing EMIs (Equated Monthly Instalments). It’s a clear signal that Indians are increasingly turning to credit to manage large or seasonal expenses, reflecting both rising aspirations and the evolving dynamics of financial resilience.
UPI Reigns Supreme, But Credit Is Catching Up
UPI continues to dominate India’s digital payments landscape, accounting for a staggering 65% of all transactions, according to the report. It remains the go-to method for small to mid-value purchases — think groceries, daily commuting, dining, and other routine spending. But as UPI cements its role in everyday transactions, another trend is rising in parallel: the growing preference for credit-based digital payments.
Credit cards and EMIs, once reserved for a narrow segment of financially savvy or high-income individuals, have now entered the mainstream. Whether it’s financing a child's school fees, covering healthcare bills, or purchasing auto parts online, more Indians are opting for flexible payment plans that spread costs over time.
Why Indians Are Embracing Credit-Driven Digital Payments
The report points to several factors contributing to this growing reliance on digital credit:
1. Festive Shopping and Seasonal Spikes
India’s festive seasons — from Diwali to Christmas to wedding season — are periods of high consumer spending. During these months, many buyers look for flexible payment options to afford electronics, apparel, jewelry, and home goods. Credit cards and EMIs become critical tools, enabling aspirational purchases without compromising financial liquidity.
2. School Admissions and Education Financing
The education sector accounts for 10% of credit-driven digital transactions, the report notes. From tuition fees to coaching classes and even school uniform purchases, many parents are financing their children’s education through structured EMIs. This reflects a broader trend where consumers are prioritizing quality education while balancing short-term cash flow.
3. Healthcare Costs and Emergency Expenses
With 15% of credit usage tied to healthcare, it’s evident that medical expenses remain a major driver of credit adoption. Whether it’s for planned surgeries or emergency treatments, families are using credit tools to manage rising medical bills in a way that avoids long-term debt.
4. Auto Ancillary and Lifestyle Purchases
Another 15% of credit-driven transactions come from the auto ancillary segment. As car ownership rises and vehicle maintenance becomes a regular expense, Indians are now spreading out payments for repairs, accessories, and parts — all through digital credit systems.
How EMIs Are Reshaping Spending Behavior
A key insight from the report is the growing comfort among consumers in choosing EMI options over one-time payments. Whether it's for buying electronics, paying fees, or funding medical treatment, EMIs are reshaping the Indian consumer's relationship with money.
This shift can be attributed to:
Improved access to credit through fintech platforms and digital banks.
Ease of use, with EMI options now available at checkout on e-commerce sites.
Increased trust in financial institutions offering transparent, low-interest EMI plans.
This behavioral change points to a new financial mindset — one that values cash flow management over the traditional belief in full upfront payments.
The Democratization of Digital Credit
Once limited to the urban upper class, access to digital credit has now expanded into semi-urban and rural markets. Digital-first lenders, fintechs, and neobanks have enabled real-time credit approvals and disbursements, often with minimal paperwork and instant KYC (Know Your Customer) verification.
As a result, previously underserved segments of society can now access small-ticket credit lines, especially during key spending periods like back-to-school season, agricultural planting cycles, or family functions.
In this way, digital credit is contributing to financial inclusion by offering affordable credit lines that cater to a wide range of consumer needs.
Phi Commerce: The Report Behind the Trend
Phi Commerce, the fintech behind this study, analyzed over 20,000 merchants across India. The data covers transactions across sectors such as retail, healthcare, education, auto, and e-commerce, offering a comprehensive view of emerging trends in credit adoption.
Rajesh Londhe, Co-founder of Phi Commerce, stated,
“As UPI and flexible credit options become mainstream, the future belongs to those who leverage these tools responsibly to drive inclusive growth and financial resilience.”
His comments reflect a deeper philosophy that underpins India’s digital transformation — one that emphasizes not just growth, but sustainable and inclusive financial empowerment.
Digital Credit for Resilience, Not Just Convenience
The report reveals a profound truth: credit is no longer just a convenience — it’s becoming a core tool for financial resilience.
When families use EMI plans to pay for school fees or hospital bills, they are effectively insulating themselves from economic shocks. This strategic use of credit enables:
Better budgeting across months
Avoidance of high-interest debt or informal loans
Access to essential services even without large upfront capital
This is a healthy evolution — when credit is used mindfully and transparently, it can serve as a safety net that boosts confidence, rather than a burden that breeds debt.
The Role of Fintechs in Powering Credit Growth
Fintech companies have played a pivotal role in making digital credit accessible, affordable, and integrated into day-to-day commerce. Through innovations like:
Instant digital KYC and onboarding
AI-based credit scoring
Buy Now, Pay Later (BNPL) models
Integrated checkout financing
...these platforms have made it seamless for users to opt for credit without long wait times or intrusive paperwork.
This agility has led to more than just increased adoption — it has changed perceptions, making credit a tool of empowerment rather than a last resort.
Credit Trends by Sector: A Deeper Dive
Let’s explore the sector-wise impact of credit-driven payments in more detail:
| Sector | Share of Credit Transactions | Key Drivers |
|---|---|---|
| Education | 10% | School fees, coaching, online courses |
| Healthcare | 15% | Surgeries, diagnostics, dental and wellness care |
| Auto Ancillary | 15% | Car maintenance, accessories, spare parts |
| E-commerce | Rising rapidly | BNPL on electronics, appliances, fashion |
| Retail Chains | Growing adoption | EMI options for gadgets, home furnishings |
These sectors are not just passive beneficiaries — many have actively partnered with fintechs and NBFCs (Non-Banking Financial Companies) to offer EMI plans at checkout, driving conversion and ticket size.
What This Means for Policymakers and Businesses
For Policymakers:
There is a need to strengthen digital lending regulations to protect consumers from predatory practices.
Education around financial literacy and responsible credit usage must become mainstream.
Continued support for fintech innovation through sandbox models and favorable guidelines is crucial.
For Businesses:
Merchants who offer flexible payment options are likely to see higher sales and improved customer loyalty.
Businesses must ensure data privacy and transparency in financing offers.
Retailers should explore in-app or POS (point-of-sale) integrations with leading credit platforms.
India’s Financial Evolution: What Lies Ahead
As digital payments continue to surge in volume and variety, India is entering a new phase of its financial evolution — one where digital credit plays a central role.
Key trends to watch in the coming years include:
AI-driven credit scoring that leverages transaction history over traditional CIBIL scores.
Voice and vernacular interfaces to onboard rural users into EMI programs.
Interoperable credit systems that link credit cards, BNPL, and UPI into a single user experience.
Green credit and financing for eco-conscious purchases like electric vehicles and solar panels.
With the right safeguards and education in place, credit can be a catalyst for building an economically resilient, digitally empowered India.
Conclusion: A Credit-Enabled, Digitally Confident India
India’s digital payment story is no longer just about speed and convenience — it's now about flexibility, financial planning, and inclusion.
The fact that one-third of all digital transactions in 2024 were credit-driven is not merely a statistic — it’s a reflection of a larger shift in consumer behavior. From managing cash flow during festive seasons to financing essential services, Indians are using credit as a smart, strategic tool.
As fintechs continue to innovate and regulatory bodies ensure consumer protection, the outlook for India’s credit-enabled digital economy looks brighter than ever. The focus now must be on responsible usage, transparent practices, and widespread accessibility.
Because when used wisely, credit isn’t a liability — it’s a stepping stone to financial freedom.
.png)
0 Comments