Nearly one-third of domestic digital payment transactions in India are now credit-driven, executed through credit cards or EMI-based financing, according to a study analysing transactions across more than 20,000 merchants.
The finding reflects a broader shift underway in how Indian households manage money.
Credit, once associated largely with buying homes or handling emergencies, is increasingly being used to smooth everyday consumption.
The behavioural change is unfolding alongside weakening household financial buffers.
Net household financial savings fell to around 5.1% of GDP in FY24, according to Reserve Bank of India data, sharply lower than levels seen earlier in the decade.
At the same time, borrowing has steadily expanded, with household debt reaching roughly 41% of GDP by early 2025, based on estimates compiled using central bank data.
While debt levels have risen, India’s household leverage remains lower than in several major economies — household debt stands at roughly 62% of GDP in China and more than 70% in the United States.
The composition of that borrowing is changing as well.
More than half of household credit now comes from non-housing retail loans, including personal loans, credit cards and consumer durable financing.
Together, the trends suggest a gradual transformation in how households balance spending, savings and borrowing.
Much of this shift is playing out through India’s rapidly expanding digital payments ecosystem, where credit options are increasingly embedded into everyday transactions.
Credit moves from emergencies to everyday spending
The shift is particularly visible in India’s rapidly evolving digital payments ecosystem.
The study by Phi Commerce, which analysed digital payment activity across more than 20,000 merchants, found that nearly one-third of domestic digital transactions in 2024 were credit-driven.
At the same time, India’s Unified Payments Interface (UPI) — a government-backed instant payment network launched in 2016 — now processes the majority of the country’s digital transactions and has become one of the world’s fastest-growing real-time payments systems.
Rajesh Londhe, Co-founder and Head of Payments at Phi Commerce, said the integration of credit options directly into digital payment platforms has made borrowing far more seamless.
“Credit is no longer considered as a means of emergency or very big purchases,” Londhe told Invezz.
“Rather, it is being more and more used as a liquidity management mechanism — to enable households to smooth consumption, cash management, or to transform bigger purchases into smaller instalments.”
Online checkout pages increasingly offer a mix of payment choices — UPI, cards, EMI conversions or pay-later options — allowing consumers to decide how they want to pay at the moment of purchase.
“The progressive normalisation of credit in the digital checkout process is one of the most important changes,” Londhe said.
The result is a form of payment segmentation.
“What we are witnessing is the development of a relatively clear payment segmentation,” he said, explaining that UPI is widely used for low-value, frequent payments.
At the same time, credit instruments are more common for higher-value discretionary purchases.
This includes spending in categories such as healthcare, travel and education, where instalment-based payments are becoming increasingly common.
The quiet build-up of EMI stacks
While digital credit has made borrowing easier, it has also introduced a new pattern: multiple overlapping obligations.
Platforms that help borrowers restructure debt say financial stress rarely emerges from a single loan.
Instead, it tends to build gradually as small obligations accumulate.
“What stands out most in our recent data is not the size of loans, but the reason behind them,” said Kunal Kishor Singh, Marketing Manager at ZAVO, a fintech platform that helps borrowers manage and restructure debt.
The company’s internal review of more than 50,000 EMI relief cases over the past year found that 61% were driven by unsecured consumption-led exposure, including credit card rollovers, short-tenure digital personal loans and consumer durable EMIs.
“The deeper signal is stacking,” Singh told Invezz.
“The median stressed borrower on Zavo carries four active obligations, and 46% have total EMI outflows exceeding 50% of their net monthly income.”
When repayment obligations reach that threshold, even small disruptions — such as delayed salary credits or unexpected expenses — can destabilise household finances.
“Default does not begin because a borrower took one irresponsible loan,” Singh said.
“It begins when multiple manageable commitments quietly compound into a liquidity squeeze.”
Lenders say borrowing remains largely need-driven
Lenders say the rise in retail credit should not automatically be interpreted as discretionary borrowing.
Bhavin Patel, CEO and Co-founder of LenDenClub, an Indian peer-to-peer lending platform that connects individual lenders with retail borrowers, said a large portion of short-term credit demand continues to be linked to everyday financial needs.
“Borrowing demand continues to be largely need-led, with many users seeking short-term credit to manage immediate financial requirements such as healthcare, education, house bills, and temporary cash-flow gaps,” Patel said.
However, he acknowledged that the scope of borrowing is gradually expanding.
“We are seeing a gradual broadening of use cases into areas like home-related expenses and personal consumption, like travelling, buying electronics or shopping.”
The rise of digital lending platforms has also brought many borrowers into the formal financial system for the first time, he said.
“Our platforms provide loans to those borrowers who are small and marginal,” Patel told Invezz.
At the same time, fintech platforms that manage debt say borrowers are increasingly trying to intervene earlier when repayment pressures begin to build.
“In the most recent 12-month period, 24% of inbound help requests came from users who were either still current on repayments or within their first missed EMI window,” Singh said.
“In the comparable period a year earlier, that share was closer to 13%.”
Preparing for uncertain income cycles
The expansion of consumer credit is also unfolding amid broader discussions about how technological change could reshape employment patterns.
Globally, economists and policymakers have increasingly debated how artificial intelligence could affect white-collar employment — a segment that represents a significant share of digital credit users in urban India.
Some platforms say concerns about income volatility are already influencing borrower behaviour.
“White-collar income structures have become more variable,” Singh said.
“Performance-linked pay, AI-driven restructuring and shorter employment cycles have made even stable professionals cautious about fixed monthly commitments.”
Lenders say they are watching the trend but have not yet seen major disruptions among borrowers.
“As per our internal survey, we are not seeing any job loss possibilities of our borrowers in the next 6–12 months time period,” Patel said.
However, lenders are increasingly incorporating potential labour-market shifts into their risk models.
“To predict such income instability we are also making our models more robust by adding predictions of AI impacted sectors and borrowers dependency on it,” Patel added.
The sustainability question
Private consumption accounts for nearly 60% of India’s economic output, making household spending a critical driver of growth in the world’s fifth-largest economy.
India’s household balance sheet remains healthier than many global peers.
Debt levels remain lower than in several advanced economies, and the banking system continues to report relatively stable asset quality.
Yet the structure of borrowing is clearly evolving.
Credit is becoming easier to access, more integrated into everyday transactions and increasingly tied to consumption rather than asset creation.
Digital payments have accelerated that shift by embedding credit directly into the checkout process.
“The expansion will continue,” Londhe said.
“But the pace will be shaped by regulation, risk management systems, and awareness of responsible borrowing among the consumers.”
Lenders say that responsibility is becoming an increasingly important part of the ecosystem as digital credit scales.
“Digital lending platforms today carry a broader responsibility beyond facilitating disbursals,” Patel said.
For policymakers and lenders, the challenge now is ensuring that convenience-driven credit growth does not outpace households’ ability to manage it.
As borrowing becomes increasingly woven into everyday financial life, the line between payment and credit is beginning to blur.
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