From Cash on Delivery to Credit Clicks: How E-Commerce Transformed India’s Payment Habits

Until about a decade ago, the typical Indian consumer was intrigued by digital payments but not entirely confident about it. The most trusted way of carrying out online transactions was "cash on delivery," which was an assurance in itself against any concerns about transacting on the internet. This is no longer the case.

With the evolution of ecommerce platforms, a safe and convenient system of payment options such as digital wallets, UPI, debit cards, and 'buy now, pay later' options has been developed, and accordingly, the mindset of consumers has changed. Digital payments are no longer a risk, but a convenience.

This shift isn't limited to the checkout process. E-commerce has also democratized access to the formal financial system. The ease of switching between wallets for small mobile recharges and credit options for smartphone purchases has introduced millions of Indians to a diverse financial toolkit.

New industry reports confirm this shift. Retail digital transaction volumes have seen a sharp increase of 35 percent in FY2025. Importantly, nearly 90 percent of consumers now prefer digital payments for online purchases.

These figures emerge from the "How URB India Pays 2025" report, jointly developed by Kearney and Amazon Pay. This study, based on over 6,000 consumers across 120 cities, clearly demonstrates that online habits are now shaping offline behavior.

According to the report, e-commerce has now become a major source of credit adoption in India, especially through co-branded credit cards. These cards are no longer limited to a limited segment, but have become mass-market products. 65 percent of co-branded cardholders have a card that is linked to some e-commerce platform.

This trend has grown particularly rapidly among Gen G and Millennials. Studies show that 65 percent of young professionals applied for a credit card soon after starting their first job. For them, credit is not a trap, but a strategic financial tool. While some use it for lifestyle upgrades, 43 percent of consumers adopt it for financial flexibility and planning.

Shashwat Sharma, Partner and Financial Services Lead at Kearney India, says that Gen G and Millennials are redefining credit adoption in India. Obtaining a credit card early in one's career is now commonplace. The major opportunity ahead lies in building trust, personalization, and inclusive financial products.

As consumers move beyond basic payments to credit-based spending, the nature of spending is also changing. The report shows that cash and UPI still dominate everyday small expenses, but credit instruments have become the preferred method for the 'lifestyle economy'.

19 percent of consumers use credit cards or BNPL to purchase electronics, while their adoption is also increasing in the fashion and lifestyle categories. 13 percent rely on credit for travel and hobby expenses. The ability to split large sums into easy installments or earn rewards has made digital carts a vital part of urban lifestyles.

The biggest impact of the e-commerce revolution is being seen in the offline market. According to the report, the preference for digital payments in offline purchases is projected to increase from 48 percent in 2024 to 56 percent in 2025. This means that consumers who trust online wallets or co-branded cards will also trust them at grocery stores or retail shops.

Vikas Bansal, CEO of Amazon Pay India, says that the preference for offline digital payments has increased from 48% to 56% in just one year, reflecting a fundamental shift in consumer behavior. The growing popularity of co-branded credit cards and 87% digital utility bill payments indicate that India's digital payments ecosystem is maturing.