India's forex market sees major shift to Tier 2/3 cities: Report

India's forex demand is shifting to Tier 2/3 cities, which now account for 53% of the market, reveals a Thomas Cook India report. Younger consumers are driving digital adoption, while leisure travel remains the largest demand source at 57%.

India's foreign exchange market is undergoing a significant shift, with Tier 2 and Tier 3 cities now accounting for 53 per cent of forex demand, while younger consumers are accelerating digital adoption and travellers are increasingly opting for destination-specific currencies, according to a report by Thomas Cook India.

Based on transaction data for April 2025 to March 2026, the report highlighted an increasingly diversified forex market driven by rising outbound travel, overseas education, corporate mobility and changing payment preferences.

Market Drivers and Demand Breakdown

Tier 1 cities, including metros, account for 47 per cent of forex demand, while Tier 2 and Tier 3 cities contribute 41 per cent and 12 per cent, respectively. Leisure travel remains the largest source of forex demand at 57 per cent, followed by corporate travel at 27 per cent and overseas education at 16 per cent.

Demographics and Digital Adoption Surge

Consumers aged 25-40 account for 37 per cent of forex usage, while those aged 41-60 contribute 36 per cent. At the same time, younger travellers are emerging as the fastest adopters of digital-first forex channels. While branch-assisted transactions still account for 75 per cent of forex purchases, 25 per cent of customers now transact digitally through websites, apps, WhatsApp and quick-commerce platforms. DIY platform usage has grown 50 per cent year-on-year over the last two years. The average digital transaction value stands at Rs 76,000, while the forex purchase cycle has shortened from 10-14 days before travel to just 4-7 days.

Currency Diversification Gains Momentum

The report also points to a gradual diversification beyond the US dollar. The dollar accounts for 49 per cent of forex demand, followed by Europe-linked currencies at 23 per cent, Asia at 11 per cent and the Middle East at 9 per cent. Demand for currencies such as the Thai Baht, UAE Dirham, Singapore Dollar, Malaysian Ringgit and Vietnamese Dong is gaining traction alongside the growth in short-haul leisure travel.

Changing Payment Behaviours

Payment behaviour is also becoming increasingly card-led. Among holiday travellers, cash accounts for 75 per cent of transactions, but cards represent 39 per cent of load value, indicating greater use of cards for planned, higher-value overseas spending. Contactless and online transactions account for 57 per cent of forex card usage.

Forex Usage in Key Travel Segments

Study Abroad Market

The study-abroad market is similarly broadening, with Europe accounting for 38 per cent of demand, followed by the US at 34 per cent.

Corporate Travellers

Meanwhile, corporate travellers show a strong preference for forex cards, which account for 84 per cent of corporate forex usage, with multi-currency cards making up 76 per cent of card usage.

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