Mumbai, 25th September 2025: Digital retail transactions spanning UPI payments to merchants, credit cards, and debit cards have become an integral part of everyday retail spending, with usage continuing to rise across India. The top 29 cities in India are rapidly closing the digital gap, with digital spends now accounting for 74% of all retail transactions, up from 45% two years ago. In other words, out of every ₹100 spent on retail in these cities, ₹74 is paid digitally. This surge reflects a deep behavioural shift among consumers, who are increasingly choosing convenience and speed of transacting digitally, revealed NeoGrowth’s latest NeoInsights study released today.
The findings come at a time when India’s digital economy is poised to contribute nearly one-fifth of national income by 2029–30, making digital inclusion a key pillar of the country’s growth agenda. Government and industry data underscore the scale of this transformation, showing that nearly half of India’s total private consumption expenditure is now made through digital payments. With a larger share of private consumption now digital than in many advanced economies, it is a strong indicator of the country’s rapid progress towards a fully digital economy.
NeoGrowth, a new age digital lender known for offering quick and hassle-free business loans to MSMEs, drew insights from banking behaviour of over 21,000 MSME retail outlets across 29 cities, covering an estimated ₹35,000+ crore in annual revenue. The 9th edition of NeoGrowth’s NeoInsights Report titled ‘How India Pays’ studied digital payments behaviour in the retail space. As India shifts to becoming a digitally empowered economy; in FY25 alone, digital retail transactions, touched a staggering ~Rs 98 lakh crore, growing 23% year-on-year. By leveraging trends from the digital payments ecosystem, NeoGrowth has been able to create inclusive, data-led lending solutions tailored to India’s diverse MSME landscape.
Arun Nayyar, Managing Director and CEO of NeoGrowth said: “Digital payments in India have moved on from being an urban privilege to becoming a national standard. What we are witnessing is a behavioural transformation, powered by technology. From kiranas to kiosks, India’s retailers are redefining adoption and efficiency in digital modes of transacting. This is accelerating the formalisation of the economy by creating digital trails. At the same time, it’s generating rich data and laying the groundwork for more democratic access to credit. We believe this shift is not just about convenience of payment, it’s about trust in a future-ready ecosystem.”
City-Wise Adoption
The study revealed India’s digital payment habits are now deeply embedded into everyday life. From personal grooming (83%) to grocery runs (68%) to vehicle maintenance (80%) digital retail transactions rule across both discretionary and essential categories. While groceries (68%) and fuel (63%) are fast catching up.
Cities such as Hyderabad (82%), Bengaluru (79%), and Pune (79%) lead digital payments adoption in the top cities, while Visakhapatnam (76%), Nagpur (71%), and Chandigarh (68%) rank highest among the cities beyond metros.
In contrast, cities such as Ahmedabad (60%), Kolkata (55%), Jamshedpur (54%), Madurai (52%), and Rajkot (48%) still rely more on cash. The gap, however, is not due to lack of access – it maybe a behavioural aspect. A higher dependency on cash-based transactions, coupled with resistance to changing familiar payment patterns, may have contributed to slow digital uptake.
Younger Retailers Lead the Way
By offering customers the choice to pay via UPI, credit cards, or debit cards, retailers play a decisive role in driving digital payment adoption. Young entrepreneurs in their 20s and 30s lead the way with nearly 80% of their business revenues now coming from digital modes. Interestingly, seasoned retailers in age 50s and above are also quickly closing the gap, with digital usage in their stores surging from close to 40% to nearly 68% in just two years.
Small Businesses Embrace Digital First
Contrary to traditional assumptions, the study finds that smaller businesses are ahead in the digital adoption curve. Retailers with turnover below Rs 1 crore stand at 79% of digital retail transactions, outpacing larger players. The larger players with a turnover of over Rs 5 crores stand at 63% of digital retail transactions. Early-stage businesses (under three years old) also show high inclination to integrate digital payments into their operations from the outset.
For today’s retail entrants, digitally-enabled payments are not an add-on but a must-have, which positions them as key accelerators of India’s rapidly evolving digital payment ecosystem. This consistent digital footprint is not just reshaping how these businesses operate—it’s also enhancing their route to formal credit. By leveraging this behaviour, NeoGrowth is able to underwrite and disburse business loans to MSMEs, helping them scale and have a long term growth.
Policy and Infrastructure Tailwinds
India’s transition to a digitally driven payment ecosystem is being shaped not just by evolving consumer and small business behaviour, but also by strong policy support. The Indian Government recently approved Rs 1,500 crore UPI incentive scheme under the Zero MDR (Merchant Discount Rate) policy that keeps UPI and RuPay transactions free for merchants and customers, the JAM trinity, and the expansion of BharatNet have laid a strong foundation. This, coupled with rising smartphone and internet penetration and the ease of app-based payments, digital transactions are fast becoming second nature across the country.
As India marches towards its centennial as an independent nation, the digital economy is poised to contribute one-fifth of the country’s overall economy by 2030, surpassing traditional sectors such as agriculture and manufacturing. The ‘How India Pays’ report underscores that this digital revolution is not only urban, but increasingly Bharat-led, youth-powered, and retailer-enabled.