Leveraging Rewards in Financial Tech: BNPL, UPI, and Wallets Driving India’s 2026 Consumer Engagement

The fintech revolution in India is progressing at lightning speed. With the rise of Buy Now Pay Later (BNPL), Unified Payments Interface (UPI), and digital wallets, consumers’ financial habits are being reshaped whether it’s paying bills, borrowing, or saving. As these payment rails become commoditized, rewards and loyalty programs are emerging as critical differentiators for fintech apps and services.

In this article, we explore how BNPL, UPI, and wallets can use loyalty programs to drive engagement, increase retention, and boost user satisfaction in India’s competitive fintech landscape by 2026.

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Why Rewards Matter in Fintech

Fintech products, particularly in the payments and lending space, face a major challenge: low switching costs. If a customer finds a slightly better offer, they can easily switch providers. This makes customer loyalty crucial for fintech products.

Here’s why rewards matter:

1. Drive Top-of-Wallet Preference

Fintech products, especially payment apps, face intense competition. Consumers often carry multiple wallets, UPI apps, and credit cards. Offering rewards gives your product an edge by making it their preferred option.

 
Paytm and PhonePe, two leading fintech apps in India, have leveraged loyalty programs to drive top-of-wallet preference. Both platforms offer rewards like cashback, discounts, and partner offers for users who choose their wallet for bill payments or P2M (peer-to-merchant) transactions. This encourages consumers to prioritize one wallet for their everyday needs.

2. Encourage Use of Specific Features

Rewards can incentivize customers to use underutilized features like auto-pay, subscriptions, or high-value transactions. Encouraging customers to unlock the full functionality of your fintech product improves both engagement and retention.

 
PhonePe incentivizes users to set up auto-pay for utility bills with bonus cashback points. This creates a habit of using PhonePe for everyday tasks, ensuring a continuous flow of transactions and increasing the frequency of usage.

3. Shape Constructive Behaviours

Rewards can be used to nudge customers toward positive financial behaviors like on-time repayments, responsible credit usage, or consistent bill payments.

 
Bajaj Finserv’s BNPL program rewards users who make on-time payments with bonus points or discounts on future purchases. This reduces delinquency rates and encourages repeat usage.

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BNPL: Rewarding Responsible Behaviour

BNPL platforms offer significant growth opportunities, but the challenge is ensuring customers use the product responsibly. Loyalty programs that incentivize responsible behavior can lower risk costs and increase repeat usage.

1. Incentivizing On-Time Payments

Rewarding users for timely repayments is crucial for BNPL platforms. Late payments are a significant risk for fintech companies, so on-time repayment rewards can improve both customer behavior and financial health.

 
Klarna, a major BNPL provider in the U.S. and Europe, rewards early repayment with discounts on future purchases. Klarna’s reward system reduces risk while keeping customers engaged and motivated to use the platform again.

2. Increase Repeat Usage Through Merchant-Linked Offers

Partnering with merchants to provide special offers when users make repeat purchases can encourage more frequent transactions.

 
Amazon Pay Later, a BNPL service in India, offers discounts and exclusive offers for users who opt for interest-free EMI payments at partner merchants, which boosts usage frequency and strengthens merchant relationships.

3. Encourage Upgrades to Higher-Value Products

BNPL providers can reward customers who upgrade to higher-value products or increase their credit limits based on responsible usage.

 
Slice, a leading fintech company in India, offers rewards in the form of cashback and vouchers for customers who increase their transaction volumes or spend consistently, motivating customers to upgrade their usage and boosting transaction volume.

4. Automating Incentives with a Reward Store

A centralized reward store integrated with your BNPL engine allows you to automate rewards at scale, simplifying reward distribution and improving operational efficiency.

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UPI: Engaging Customers Beyond “Free Payments”

While UPI has revolutionized payments by making them instant and free, there’s an opportunity to leverage loyalty rewards to drive deeper engagement. UPI transactions are primarily focused on utility, so a reward program can increase differentiation and engagement beyond just the act of payment.

Micro-Rewards for New Use-Cases

To engage customers beyond just bill payments, reward them for new use-cases like P2M transactions, QR code payments, and cross-border payments.

 
Google Pay offers micro-rewards and cashback for users who scan QR codes for payments. This incentivizes adoption of UPI beyond traditional transactions like bill payments, promoting useful features like QR-based payments for in-store purchases.

Campaign-Based Incentives

Campaign-based rewards tied to festivals, events, or merchant promotions can drive engagement during peak times.

 
PhonePe launched a festival-themed campaign during Diwali, offering cashback and discounts for transactions during the festival period, helping drive engagement at a time when UPI payments surge.

Gamified Rewards

Incorporating gamified elements like scratch cards, spin-to-win rewards, or instant-win games can increase excitement and drive repeat usage.

 
Amazon Pay runs “spin-the-wheel” promotions during festive seasons that reward users with instant prizes when they make qualifying transactions, creating excitement around their platform and incentivizing repeat purchases.

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Wallets and Super Apps: Building Ecosystem Loyalty

Super apps and digital wallets in India are increasingly acting as ecosystem hubs, offering services across payments, shopping, travel, and investments. These apps create a powerful opportunity to tie rewards across a range of services, boosting stickiness and loyalty.

Tie Rewards Across Multiple Services

A unified rewards platform allows users to earn rewards for using a variety of services, such as payments, shopping, travel, and investments, all within the same ecosystem.

 
Paytm has integrated rewards across its payments, bill payments, shopping, and investment services, offering users cashback, coupons, and exclusive deals for engaging with multiple services within the app, promoting cross-usage.

Reinforce Ecosystem Stickiness

By linking rewards across services like finance, shopping, travel, and entertainment, super apps build ecosystem loyalty, making it harder for users to switch to competing apps.

 
Reliance Jio’s JioMoney rewards customers for recharging, shopping, booking travel, and even streaming content on its platform, reinforcing Jio’s ecosystem and boosting user retention.

Unified Reward Store for Seamless Experience

A centralized reward store allows users to earn points or rewards in one place and redeem them across multiple products, reinforcing loyalty to the entire ecosystem.

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Designing for 2026 Scale

By 2026, the volume and speed of transactions in fintech will be at unprecedented levels. To stay competitive and meet consumer expectations, fintech companies will need:

1. API-First Reward Infrastructure

Invest in an API-first infrastructure that allows seamless integration with payments platforms (BNPL, UPI, wallets) for real-time accrual and redemption of rewards.

 
Stripe, a fintech platform, has implemented an API-first loyalty system that allows businesses to integrate loyalty features directly into their payment infrastructure, ensuring real-time transactions and reward points management.

2. Strong Guardrails for Fraud, Misuse, and Regulatory Compliance

As fintech products scale, the risk of fraud and misuse increases. It’s critical to have robust security protocols in place to ensure compliance with regulations like KYC, AML, and other data protection laws.

3. Clear Financial Models for Sustainable Rewards

Rewards programs need to be financially sustainable, so developing clear financial models is crucial for ensuring profitability.

 
Paytm uses a sustainable financial model where rewards are tied to transaction volume and merchant fees, ensuring the cost of rewards does not exceed the profits generated from user engagement.

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Conclusion

In India’s rapidly evolving fintech landscape, BNPL, UPI, and digital wallets are transforming how consumers engage with payments, savings, and investments. As competition increases and fintech services become commoditized, rewards and loyalty programs offer a significant differentiator that can drive customer engagement, retention, and market share.

By implementing well-designed reward systems, integrating them into the core fintech infrastructure, and focusing on sustainable growth and compliance, fintech companies can ensure their rewards program delivers long-term value creating deeper relationships with customers and increased profitability.

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About The Reward Store

The Reward Store helps fintech companies design, implement, and scale reward systems for their digital wallets, BNPL, and UPI platforms. We provide:

• Customizable reward store solutions for fintech apps and super apps.
  
  
• Real-time reward accrual and redemption systems integrated with BNPL, UPI, and wallets.
  
  
• Analytics and reporting tools to measure program success and make data-driven decisions.
  
  

Visit The Reward Store to learn more about how we can help you build an effective reward system for your fintech products.

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