India's Small Cities Drive 44% Digital Payment Boom Amid Festive Rush

The report from Mintoak, the merchant SaaS fintech platform, analysed data from over 4 million SME merchants on its platform and found that the number of transactions grew 42 per cent YoY.

Tier 3 cities showed the fastest growth, with their digital payments value up 51 per cent and transactions up 49 per cent YoY, led by watches and jewellery ( up 77 per cent) and grocery stores and supermarkets (up 59 per cent).

Festive growth was volume-led, indicating higher customer footfall and repeat digital behaviour rather than discount-driven spikes.

"Tier 2 and Tier 3 markets outperformed metros across nearly every category, signalling deeper smartphone penetration, stronger consumer confidence, and a growing comfort with digital payments outside major cities," the report said.

Tier 2 cities posted a 45 per cent rise in payment value, with higher YoY discretionary spending in jewellery (up 64 per cent) and supermarkets (up 46 per cent). Tier 1 showed stable but modest YoY growth at 31 per cent.

Contrary to popular perceptions, Kirana and supermarket merchants proved resilient amidst the challenge from quick commerce, with grocery and supermarket payments value up 51 per cent and transactions up 50 per cent.

Overall analysis found that the Watches and Jewellery category saw the strongest surge, with digital payment value growing 66 per cent YoY. Despite higher gold prices, demand continued to rise - a marker of increasing disposable income and aspirational purchasing from non-metro India.

"When smaller cities show higher transaction frequency, sustained discretionary demand, and a willingness to spend on categories like jewellery, it reflects real confidence at the grassroots," said Raman Khanduja, CEO and Co-founder, Mintoak.

- IANS