Tier-2 Cities Outpace Metros in Buy Now, Pay Later Adoption, Study Finds
India's smaller cities are emerging as the biggest users of Buy Now, Pay Later (BNPL), a type of short-term credit offered at checkout, according to a new study. The report found that about 60% of respondents in Tier-2 cities have used BNPL, comfortably ahead of 45% in metros and 52% in Tier-3 locations. Yet, the study also found that 64% of all urban respondents have never formally applied for digital credit through a standalone app, indicating a gap between using embedded credit and actively seeking a loan.
What this means
This data points to a crucial split in consumer psychology. People are increasingly comfortable using credit when it is seamlessly woven into a purchase, but they remain hesitant to proactively apply for a loan. For banks and Non-Banking Financial Companies (NBFCs), the signal is clear: the most effective way to acquire new credit customers in fast-growing Tier-2 markets is through partnerships with merchants and embedding finance at the point of sale. Simply launching another lending app may not be enough. The trend confirms that these smaller cities are indeed the next frontier for retail credit growth.
Most affected: Fintech lenders and retail credit divisions
Key takeaway: To capture the credit appetite in Tier-2 cities, financial institutions should prioritise embedded finance and point-of-sale credit solutions over standalone digital loan apps.
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