Amazon Pay Expands Credit Services to Small Town India Amid Rising Demand

Amazon Pay is witnessing a significant shift in its customer base, with over 75 percent now residing outside India’s major urban centers. This trend highlights the growing digital adoption in smaller towns and reveals an increasing appetite for credit products among these users. Vikas Bansal, CEO of Amazon Pay India, shared insights into this development, noting that no-cost EMI transactions during Amazon’s Great Indian Festival sale surged at a rate four times higher in Tier-III cities compared to metropolitan areas.

Amazon Pay’s leadership is aiming to broaden the platform’s offerings beyond simple payments to include credit and insurance services over the next three years. Bansal envisions a future where these financial products reach every corner of India. "Can I provide insurance to every Indian? Can I give credit to every Indian?" he asked, signaling the company’s ambitious goals.

This push toward credit and insurance comes amid Amazon Pay India’s financial challenges. The company reported a net loss increase of roughly 33 percent, reaching ₹1,149 crore in the fiscal year 2026. Bansal did not specify when profitability might be achieved or disclose the current size of the loan portfolio. Instead, he emphasized focusing on customer growth and enhancing unit economics. The digital-first approach, which avoids physical branches, enables Amazon Pay to keep operational costs relatively low.

Amazon’s acquisition of Axio (formerly Capital Float) last year, following approval from the Reserve Bank of India, marked a strategic move to strengthen its credit offerings. The $200 million deal converted a six-year partnership into full ownership, expanding its Buy Now Pay Later services. Bansal explained that this acquisition aims to deepen penetration in Tier-II, -III, and -IV cities while lowering credit costs and widening distribution networks.

The Great Indian Festival, running from October 8 to November 11, attracted nearly 4 billion customer visits, with 70 percent originating from outside major metros. Sales volume increased by over 50 percent year-over-year, reflecting a consumer trend toward higher-end electronics like premium smartphones and large-screen televisions. Despite rising costs driven by expensive memory chips and a weakening rupee, easy credit options helped sustain demand.

EMI transactions grew by 40 percent compared to the previous year, accounting for half of the purchases in mobiles, TVs, and appliances. Notably, no-cost EMI options made up 90 percent of EMI spending and attracted 25 percent more customers than last year. Amazon Pay Later’s no-cost EMI spending doubled year-over-year, with issuances increasing by 30 percent. Approximately 75 percent of Pay Later purchases utilized EMI plans.

Usage of Amazon Pay’s Unified Payments Interface (UPI) services rose substantially, with a 40 percent increase in users and nearly 50 percent more transactions. Around 40 percent of customers now opt for UPI payments. Amazon Pay Balance users more than doubled, and transaction volumes increased by 2.5 times. Credit card usage via Amazon Pay ICICI Bank Credit Card grew by 25 percent year-over-year, with longer EMI tenures of 12 months or more tripling.

Despite widespread awareness of digital credit among urban Indians—88 percent know about it—only 31 percent actively use such services, according to the How Urban India Pays Report 2026, a joint study by Amazon Pay and the Pahlé India Foundation. The survey covered over 5,000 consumers and 1,000 merchants across 100 cities in 20 states. It found that consumers generally trust payment apps, rating security and payment experience highly. However, confidence dips when it comes to credit products offered through the same apps.

More than half of consumers said they would be willing to borrow through their payment app if fraud protection was guaranteed, while just 16.7 percent said they would refuse such borrowing. Bansal pointed out that trust remains a key hurdle for digital credit adoption. Users often worry about understanding loan terms, transparency, and potential fraud risks. He stressed the need for stronger consumer protection measures and grievance redressal mechanisms to build confidence comparable to that of digital payments.

New regulations introduced by the National Payments Corporation of India and the Ministry of Finance impose a 0.4 percent merchant discount rate on eligible person-to-merchant UPI transactions exceeding ₹2,000. Bansal welcomed this framework, saying it enables payment providers and banks to invest in technology while encouraging merchants to shift away from cash transactions.

Looking ahead, Bansal expressed optimism about artificial intelligence playing a role in customizing financial services for individual consumers instead of broad segments. AI could also help enhance trust by improving fraud detection and customer service. He noted that companies will remain accountable for activities under their control, even as service delivery methods evolve.

With a background in building credit businesses at Visa and American Express, Bansal highlighted India's vast unmet demand for digital credit and insurance. Current usage rates remain in single digits, underscoring a large market opportunity. The growth Amazon Pay is experiencing in smaller towns reflects the broader financial inclusion trend, as digital platforms increasingly bring formal financial services to underserved populations.