The digital payment revolution in India has extended beyond its major metropolitan areas and is now thriving in non-metro cities as well.
According to Visa’s latest whitepaper, ‘Bridging the Gap: Payments in India Beyond Metros’, smaller local cities which fall under standard national categories of B and C+ have become dynamic hubs for digital transactions. Since 2019, card spending in these areas has surged by 175%, significantly outpacing the respective growth seen in metro cities.
Cities in India are categorised into three tiers: Cat A (metros such as Mumbai, Delhi, and Bengaluru), Cat B (growing cities like Jaipur and Bhubaneswar), and Cat C+ (emerging hubs like Sangli and Tumkur). Notably, digital payment infrastructure in India has greatly evolved over the last decade, continuously bridging the gap between payment solutions available in metro and non-metro settlements.
One of the reasons for such robust advancement of digital payments in semi-rural and smaller urban areas is the evolving affluent and middle-income consumer segments in these regions. Previously, affluence was primarily confined to metropolitan areas. However, today, Cat C+ cities witness a fourfold increase in annual card spending of over ₹2 lakh per card, compared to just a 1.4X rise in metro areas.
Besides, online spending in these cities has also grown significantly, jumping from 53% to 73% in the given five-year period. The growth of online sales is driven not only by rising e-commerce adoption but also by rising income levels in non-metro cities. These cities now host more people who can afford discretionary spending on items like apparel, travel, and digital entertainment.
Besides, spending in specific entertainment categories, such as online gaming and digital content, has seen exponential growth in non-metro areas as well, increasing 16X and 9X, respectively. It reflects the expanding demand for digital services across the country.
Improved digital connectivity and the proliferation of affordable smartphones are accelerating the increasing popularity of digital services, e-commerce and digital payments in India. Additionally, the trend is supported by the government. Thus, initiatives like the Pradhan Mantri Jan Dhan Yojna (PMJDY), Digital India, and GST have played a pivotal role in boosting financial inclusion and digital adoption across the country.
At the same time, the Visa report highlights that Cat B and C cities still face significant challenges in formal credit access. In 2019, formal credit penetration in Cat B+ cities was a mere 10.5%, compared to the solid 42.4% in metros. Many countryside consumers still rely on informal credit options like moneylenders, which are often costly or even predatory. This credit gap presents a vast opportunity for financial institutions to create tailored credit solutions for these aspirational yet underserved markets.
