Urbanisation and digitisation have transformed the way India consumes. From shopping apps to payments, financial services, and entertainment, connectivity has spread to the last mile, driving demand across both urban and rural India.
At the heart of this shift is India’s financial digitisation journey. UPI now processes billions of transactions a month, offering not just convenience but also access to credit through innovations like “credit on UPI.” While “Buy Now Pay Later” (BNPL) first gained popularity globally, its growth in India since 2018 has been extraordinary, supported by widespread merchant adoption.
The rise of digital credit and consumption
Today, everyone from a neighborhood grocer to a national retail chain can accept digital payments. This deep integration of digital finance has led to greater use of credit cards, small-ticket instant loans, and quick-commerce financing. The ecosystem enabling this expansion rests on solid infrastructure.
Programs like Jan Dhan Yojana, India Stack, and nationwide telecom reach have provided the rails, while consumer aspiration and service-provider innovation have accelerated adoption. Together, these have fueled a steady rise in consumption, cutting across India’s urban and rural divide.
On the macroeconomic side, interest rates and inflation have remained relatively stable, providing a supportive environment. At the same time, the evolving credit ecosystem has empowered consumers to make more aspirational choices. Consumption, therefore, is increasingly being driven by access to credit.
Data, risk management, and innovation
These combined forces of urbanisation and digitisation are reshaping credit demand while simultaneously elevating the importance of advanced risk management. With the expansion of formal credit into semi-urban and rural markets, lenders now have the opportunity to move beyond traditional salaried and urban borrowers. This shift requires more sophisticated underwriting, where empirical data from credit bureau records and digital transaction trails are leveraged to build complex and nuanced risk models.
The adoption of machine learning and AI further strengthens this process by enabling predictive insights, alternative credit scoring, and real-time monitoring of borrower behaviour. These tools not only improve accuracy in assessing repayment capacity but also expand credit access to new-to-credit consumers.
In parallel, demographic shifts in borrowing patterns, driven by younger, digitally savvy consumers demanding flexible, instant credit products, are prompting lenders to innovate with small-ticket loans, BNPL solutions, and embedded credit offerings. Mobile-first, API-driven platforms are replacing branch-centric models, ensuring greater reach and faster delivery.
However, the rapid growth of digital lending and consumption credit requires strict adherence to regulatory guidelines and robust governance frameworks. Those who successfully integrate data-driven risk models with product innovation will not only manage risks effectively but also enhance customers’ “life time value” through cross-sell and up-selling opportunities in insurance, investments, wealth solutions, and high-value credit products.
Responsible borrowing and financial literacy
This makes responsible borrowing central to India’s growth story. The digital lending ecosystem makes credit more accessible than ever, not only for essentials but also for discretionary and lifestyle purchases. But borrowers must remember that easy access to credit is not the same as free money. Discipline in borrowing and timely repayment are crucial, not only for individual financial health but also for maintaining a strong credit history and score. Both directly affect a borrower’s ability to access future credit on favourable terms. Borrowing within one’s capacity safeguards financial well-being today while also shaping the ability to access credit in the future.
Credit awareness and education are therefore pivotal. Credit bureaus now offer individuals at least one free credit report per year, allowing borrowers to monitor and understand the impact of their credit behaviour on their scores. Financial institutions and regulators are also placing greater emphasis on financial literacy so that borrowers clearly understand the long-term consequences of their credit-related decisions.
India’s digitisation and financial innovation have unlocked enormous growth potential. But for this progress to remain sustainable, the expansion of credit must be through balanced risk and expansion strategies. A strong financial sector can only thrive if supported by responsible and informed borrowers. The discipline of households in managing savings alongside credit will ultimately determine whether India’s consumption story continues to fuel GDP growth without creating vulnerabilities in the years ahead.
Disclaimer: The information provided in this article is for informational purposes only and does not constitute financial, legal, or professional advice. While every effort has been made to ensure accuracy, readers should verify details independently and consult relevant professionals before making financial decisions. The views expressed are based on current industry trends and regulatory frameworks, which may change over time. Neither the author nor the publisher is responsible for any decisions based on this content.
Sachin Seth,Chairman CRIF High Mark and Regional MD CRIF India & South Asia