This Diwali, India’s celebration of lights was mirrored in its digital payments ecosystem. From street-side vendors to luxury showrooms, the sound of UPI notifications replaced the jingle of coins as millions of Indians embraced instant digital transactions and Buy Now Pay Later (BNPL) options to finance their festive shopping. Together, these platforms are redefining how the country spends, saves, and celebrates and signalling a major behavioural shift towards credit-fuelled convenience.
According to Kunal Jhunjhunwala, founder, Airpay Payment Services, “The transaction volumes through UPI have not only matched but also exceeded the previous year's performance significantly this Diwali 2025. With UPI transactions hitting an all-time high of 1,658 crore in number and Rs 23.5 lakh crore in value during October 2024, the year-on-year figures showed an incredible hike of 45 per cent in volume and 34 per cent in value.” He added that UPI transactions crossed the 20 billion mark in August 2025, fuelled by deeper penetration in tier 2 and 3 towns.
Changing Festive Behaviour
This festive season, consumer behaviour appears more planned and digitally inclined. Jhunjhunwala noted that “over 82 per cent of Diwali shoppers begin their planning as early as August.” Digital payments, Jhunjhunwala said, have made it easier for consumers to transact instantly without relying on cash, while a new Rs 10 lakh daily limit for select merchants has further boosted high-value digital purchases.
Adding perspective, Bhargav Errangi, founder, Pop UPI, observed a nuanced shift. “UPI continues to be the backbone of seamless, frictionless payments — it’s fast, reliable, and deeply embedded in daily life. Yet, interestingly, we’ve seen a slight degrowth in UPI transaction activity during the festive period, largely because consumers are shifting their big-ticket spending towards credit-driven instruments like credit cards and BNPL.”
Errangi said this marks a behavioural transformation — from spending one’s own money to using short-term credit for celebrations. “UPI promotes disciplined spending, while BNPL brings flexibility. However, it also carries a risk of impulsive buying and poor financial planning if used without control,” he cautioned.
Rise Of BNPL And Credit Culture
If UPI has become the foundation of India’s digital economy, BNPL has emerged as its credit enabler. Jhunjhunwala said that BNPL continues to significantly influence buying patterns, especially among millennials and Gen Z. “During the last holiday season, retailers in discretionary categories like fashion, electronics, and home tech reported that up to 30 per cent of their sales were made through BNPL,” he said.
The appeal lies in affordability and access. “BNPL allows consumers to spread the cost of purchases and receive products immediately, encouraging them to buy more expensive items. This not only increases average order values but also boosts digital transactions during peak festive periods,” Jhunjhunwala explained.
Partha Sarathi Bhattacharyya, Chief Business Officer – Retail, Ample Group, echoed the sentiment. “The increasing popularity of Buy-Now-Pay-Later offers and zero-cost EMIs is an indication of how new-age consumers are being influenced by convenience and affordability,” he said. “However, BNPL has also fuelled impulsive buying and frequent returns that are not financially or ecologically sustainable.”
UPI And BNPL: A Complementary Pair
An emerging trend this Diwali is the fusion of UPI and BNPL. Jhunjhunwala said, “UPI, coupled with BNPL, is becoming popular among customers for purchasing higher-value items. Many fintech platforms now allow converting UPI transactions into EMIs, offering both instant payment and instalment-based affordability.”
Kundan Shahi, founder, Zavo, added that credit-based payments nearly doubled from 3.5 per cent to 7 per cent of transactions during last year’s festive period. “Consumers are moving away from cash and embracing digital payments for gifts, gadgets, and even travel,” he said. “This trend signals greater financial inclusion, giving people more tools to manage cash flow and fulfil festive wishlists without upfront cash — but it also raises a cautionary flag about overreliance on easy credit.”
Sustainability Of The Trend
While the surge is impressive, experts say its sustainability depends on consumer responsibility. Jhunjhunwala believes continued adoption of UPI and BNPL will depend on “financial literacy and responsible use.” He cautioned that without proper budgeting and repayment awareness, users risk debt stress.
Mahesh Shukla, founder and CEO, PayMe India, shared a similar view. “This Diwali, the surge in UPI and BNPL transactions underscores how India’s digital economy has matured, shifting from convenience-driven adoption to confident participation,” he said. “What began amid concerns around fraud has evolved into a secure, globally recognised ecosystem unlocking opportunities for small entrepreneurs and women sellers.”
Shukla stressed that “the festive surge is not merely about consumption but about inclusive, ethical finance — ensuring digital progress translates into long-term empowerment.”
Looking Ahead
Industry data shows that retail digital payments accounted for 99.8 per cent of total retail transactions this Diwali, driven largely by fashion, electronics, and lifestyle categories. Mukesh Pandey, Director, Rupyaa Paisa, noted that UPI is expected to account for 90 per cent of all retail digital transactions by 2026–27, processing over 1 billion transactions daily.
However, he warned of rising concerns. “The rampancy of BNPL operations has raised eyebrows due to impulse spending and subsequent debt accumulation. The challenge now is to strengthen cybersecurity and promote prudent financial habits,” Pandey said.
Vinay Singh, CPO, Olyv, added that digital credit mechanisms linked with UPI are helping consumers manage liquidity wisely. “This season highlights a financially-savvy borrower profile — focused more on managing liquidity than simply spending on credit,” he said.
Rohit Mahajan, founder and managing partner, Plutos ONE, concluded that while digital financial tools offer flexibility and purchasing power, “the key lies in intelligent use to ensure a financially smart Diwali.”
UPI and BNPL together are scripting a new chapter in India’s festive economy, one that balances instant gratification with financial caution. As digital payments continue to drive inclusion and innovation, the coming years will test whether this transformation leads to empowerment or excess. For now, this Diwali stands as a testament to how India celebrates with light, tech, and a tap. |
