India Buy Now Pay Later Market Business Report 2026-2031: Rationalising BNPL Portfolios Shifts Competition Toward Embedded, Bank-backed Models

Dublin, Jan. 20, 2026 (GLOBE NEWSWIRE) — The “India Buy Now Pay Later Business and Investment Opportunities Databook – 90+ KPIs on BNPL Market Size, End-Use Sectors, Market Share, Product Analysis, Business Model, Demographics – Q1 2026 Update” report has been added to ResearchAndMarkets.com’s offering.

The BNPL payment market in India is expected to grow by 22.5% on annual basis to reach US$30.45 billion in 2026.

The buy now pay later market in the country has experienced robust growth during 2022-2025, achieving a CAGR of 34.2%. This upward trajectory is expected to continue, with the market forecast to grow at a CAGR of 15.5% from 2026-2031. By the end of 2031, the BNPL sector is projected to expand from its 2025 value of USD 24.86 billion to approximately USD 62.61 billion.

Competition is expected to consolidate around a smaller number of regulated lenders powering pay-later options across ecommerce, wallets and UPI. Embedded credit within large payment ecosystems will overshadow standalone BNPL branding. Banks will deepen UPI credit line penetration, while fintechs operate primarily as origination or customer experience layers.

Current State of the Market

• BNPL in India operates within a regulated digital lending framework, with competition concentrated among banks, NBFC partners, and large ecosystem platforms. RBI’s updated digital-lending requirements and restrictions on loading credit lines into wallets have narrowed the presence of standalone BNPL fintech models, shifting the market toward bank-linked pay-later products, card-based EMIs, and UPI-linked credit lines.
• Providers compete primarily through merchant integration depth, approval rates and underwriting quality rather than promotional pricing. UPI’s growing role, supported by “credit line on UPI” and the expansion of RuPay credit cards on UPI, has intensified competition among banks to link their credit products to UPI front ends.

Key Players and New Entrants

• Amazon Pay (with Capital Float), Paytm-branded postpaid models (via bank/NBFC partners), and Flipkart’s credit ecosystem remain influential in ecommerce-driven BNPL. Banks such as ICICI Bank, HDFC Bank, Axis Bank and SBI dominate card-EMI and UPI-linked credit propositions, while fintechs like LazyPay, Simpl and Kissht continue to operate, though at reduced scale or with revised constructs.
• New entrants in 2024-25 are mostly bank-anchored offerings embedded within UPI apps or ecommerce apps rather than standalone BNPL startups, reflecting regulatory expectations. Pure-play BNPL launches have been limited following ZestMoney’s exit announcements and the discontinuation of wallet-linked pay-later variants.

Linking BNPL with UPI and cards blurs boundaries between payment instruments

• BNPL is increasingly delivered through existing card and UPI rails rather than as standalone apps. RuPay credit cards can now be linked to UPI, allowing customers to make QR code payments from their credit lines via apps such as Paytm, PhonePe, and others.
• NPCI’s “Credit Line on UPI” framework lets banks expose revolving or fixed credit lines through UPI handles, enabling EMI-like or pay-in-full experiences at merchants that previously only accepted bank-account-based UPI. Banks and fintechs are also launching EMI-centric credit cards that make “pay-over-time” the default behaviour (e.g., EMI-driven cards launched with fintech partners such as BharatPe and Unity Bank in 2025).
• UPI’s ubiquity of over 16.5 billion transactions in a single month in late 2024 makes it the natural front-end for any consumer payment proposition. Credit products bolted onto UPI gain instant merchant acceptance and consumer familiarity.
• Regulators and banks prefer credit to flow through established products (cards, formal credit lines) that can be fully reported to bureaus and subject to existing prudential rules, rather than through opaque pay-later wallets. For providers, using UPI and card schemes lowers acceptance-side friction: they can plug into existing QR and POS infrastructure rather than negotiate separate BNPL integrations for every merchant.
• The distinction between “BNPL” and “card EMI” will narrow; consumers will experience BNPL as just another way to use their card or bank credit line at UPI-enabled merchants. Standalone BNPL apps that do not control a card or UPI-linked credit product will find it harder to secure top-of-wallet status at checkout; many may pivot to becoming origination or collection partners to banks. Metrics such as “credit on UPI” usage and UPI-linked card EMIs will become more important indicators of BNPL-type activity than pure “BNPL app volumes”.

Using small-ticket BNPL to extend credit access forces sharper risk management

• Small-ticket digital credit, including BNPL-type products, has scaled rapidly, particularly among younger and new-to-credit customers. Industry association data show digital lenders disbursed about ?97,000 crore in H1 FY2025, with roughly four-fifths of loans below ?25,000 and many of them short-term.
• Persistent income pressure and higher interest rates have kept demand for short-term, low-ticket credit elevated, especially for online shopping, bill payments and everyday expenses. Fintech interfaces make it simple to take multiple small loans, but regulators are now tightening the loop: weekly or more frequent bureau reporting, structured KFS, and clear lender-of-record roles increase visibility of BNPL obligations in credit assessment. Banks, facing rising card delinquencies, are becoming more conservative when underwriting mortgages and large loans, often treating BNPL and other small-ticket exposures as part of total indebtedness.
• BNPL will remain a relevant entry-level credit option, but acceptance criteria will tighten: more users will face income checks, bureau pulls, and lower limits, especially if they already have multiple short-term loans. Providers will invest more in underwriting and collections, using real-time transaction data, employer information and repayment histories to segment risk, rather than relying primarily on growth. For consumers, BNPL behaviour will increasingly influence access to other credit: missed instalments or stacking multiple BNPL lines are more likely to affect home-loan or auto-loan approvals, which in turn should temper uncontrolled usage.

Rationalising BNPL portfolios shifts competition toward embedded, bank-backed models

• The Indian BNPL market has already seen a correction: high-profile startups such as ZestMoney announced shutdown plans in 2023-24 after facing funding and regulatory headwinds, while other products (e.g., certain wallet-linked BNPL cards) have been discontinued or scaled back.
• At the same time, large ecommerce, wallet, and PSP players continue to offer pay-later options in partnership with banks and NBFCs (e.g., Amazon Pay Later via Capital Float, Paytm Postpaid-type offerings, card-EMI flows through PSPs), but with tighter compliance and underwriting aligned with the new digital lending regime. Newer entrants in 2024-25 are less likely to position themselves as pure BNPL providers and more as embedded-credit platforms or lending-as-a-service partners for merchants and payment gateways.
• Funding conditions for loss-making consumer-lending models have tightened, pushing fintechs to prioritise unit economics and stable bank/NBFC partnerships over standalone growth. Regulatory constraints on wallet-based models and the emphasis on regulated entities as lenders of record naturally favour bank- or NBFC-backed BNPL, whether at checkout or via UPI/card rails. Large merchants and PSPs prefer dealing with fewer, well-regulated lending partners that can scale across categories, thereby reducing the room for many small, niche BNPL startups.

Recent Launches, Mergers, and Acquisitions

• Key activities include banks expanding UPI-based credit lines, partnerships between merchants and regulated lenders, for instant, EMIs, and fintech-bank tie-ups to realign disbursement flows with RBI rules. ICICI Bank’s discontinuation of its PayLater credit line on UPI illustrates a broader industry shift toward portfolio rationalisation. No major BNPL-specific M&A occurred in the past year, though several fintechs have scaled down or restructured operations after regulatory tightening.

Key Attributes:

Companies Featured

• OlaMoney Postpaid
• Flipkart Pay Later
• Amazon Pay Later
• ePayLater

For more information about this report visit https://www.researchandmarkets.com/r/tpn3zm

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• Indian Buy Now Pay Later Market