The microloans driving India’s festive shopping—from smartwatches to protein powders

Fintech startups such as Snapmint and Kiwi are seeing a rush of young shoppers avail low-interest consumer loans for their festive season purchases.

Snapmint, a Mumbai-based non-banking financial company, facilitates sales of multiple brands on its platform via interest-free loans that can be repaid in equated monthly installments (EMIs). In September, Snapmint saw its total volume of interest-free EMI transactions surge to more than 1 million from about 350,000 a year ago.

“The 20–30 age group represents nine out of every 10 of our customers for whom no-cost EMI has become the go-to finance option,” said co-founder Abhineet Sawa. Interest-free EMIs are the third-most popular payment method behind UPI and cash-on-delivery—a “striking surge we’ve never seen before”, he added.

Last week, Kiwi rolled out a so-called ‘interest-back EMI on UPI’ feature that allows consumers to split big-ticket purchases into easy instalments and earn back the interest paid. Shoppers on the platform are spending at least 50% more on e-commerce purchases using Credit on UPI this year than last year, said co-founder Anup Agarwal.

Credit on UPI, rolled out by the Reserve Bank of India two years ago, allows users to access pre-approved credit lines from banks directly through UPI, or the Unified Payments Interface that allows for realtime bank transfers.

“Transaction volumes on Credit on UPI have grown sharply, both in spends per user and average ticket size of festive purchases,” Agarwal said. “This growth isn’t limited to metros. We’re seeing meaningful traction coming from tier-2 and tier-3 cities, where users are increasingly adopting digital credit for both everyday and celebratory spending.”

Other fintech companies including Fibe (formerly EarlySalary) and PayU’s LazyPay also offer low-cost consumer loans via partners such as food-delivery platform Zomato, ticket-booking app BookMyShow, and ride-hailing startup Rapido.

E-commerce giants Flipkart and Amazon are among pioneers in offering low-cost consumer loans through co-branded credit cards and lending platforms like Bajaj Finserv.

During its annual two-week Great Indian Festival sale that ended last week, Amazon India saw shoppers avail loans on its platform for one out of every six mobile phone, large appliance, and other electronics purchases. Of this, 80% of the purchases involved interest-free loans, the company said in a statement on Thursday.

The overall volume of no-cost loan transactions grew 10% this year, while Amazon Pay Later saw a 15% increase in usage, it added.

Reckless spending, minimal scrutiny

Brands are increasing striking partnerships with lending platforms to offer instant loans to consumers, said Chirag Taneja, chief executive of GoKwik, an e-commerce aggregator for companies including consumer goods giant ITC Ltd, eyewear retailer Lenskart, and beauty products retailer Lakme.

Personal care and apparel companies are rapidly partnering with NBFCs as demand for credit surges even for frequently bought products, he added.

On Snapmint, the fashion category accounted for about 30% of all transactions in the previous 12 months, when it disbursed about ₹3,000 crore in loans. Electronics accounted for 22% of the purchases, and travel bookings, 12%. For Kiwi, non-discretionary categories such as e-commerce and travel account for nearly 40% of total spending.

Nearly 41% of the products sold on Snapmint this year were priced under ₹500—up from 30% last year—while 18% were in the ₹1,000-2,000 category.

However, the growing reliance on credit for low-cost purchases is a concern as it could encourage reckless spending and due to the minimal scrutiny involved, said Anand Agrawal, chief technology and product officer at debt collections platform Credgenics.

“The rise in buy-now-pay-later, short-tenure loans, and digital credit channels has contributed to a higher volume of small-ticket borrowings this year,” he said. “In the months soon after the festive spending is over, incidences of delayed repayments and overdue accounts are expected to see an uptick as compared to the other steady months.”

The Gen Z borrowers

According to credit bureau CRIF High Mark, credit card payments overdue by 91–360 days jumped more than 40% to ₹34,000 crore in the year to 31 March, while credit card spending shot up 15% in that period to ₹21 trillion. Consumer loans on EMIs can be availed using credit cards, debit cards, and UPI.

Agrawal said the combination of aggressive unsecured lending and easier availability of credit through digital channels is expected to make loan repayments more challenging, especially during festival months when the quantum of loans are higher.

“As the festival period kicks off, we have seen ‘average days past due’ increase by 3-4 days across the delinquency stages,” said Ananth Shroff, co-founder and CEO of debt collections platform DPDZero. ‘Average days past due’ refers to the average number of days a customer is late in repaying a loan beyond the original due date.

While consumer loans have become easy to obtain via digital apps in recent years, lenders are not conducting adequate risk checks or vetting the credit scores of borrowers, said Paritosh Gunjan, co-founder at wealth management firm Liquide. “This places loans in the hands of individuals who don’t necessarily understand how they work and how credit scores can be impacted.”

In the December quarter of 2024, users born after 1995 accounted for 41% of new-to-credit customers, per data from TransUnion Cibil, a Reserve Bank of India-licensed credit bureau.

“There’s a fundamental shift in the way this generation views money versus the previous generation,” said Gunjan. “The ‘save before you spend’ ideology no longer exists and accessibility to credit makes it so much easier to buy everything off the shelf.”