Digital payment adoption in India

Opting for digital payment methods has helped MSMEs in India grow rapidly

Indians love digital payments.

A few years ago, you could hear someone in your circle crib about a shopkeeper not letting you buy something because you did not carry the exact change amount.

In 2017, the digital payment revolution boomed in India. BHIM (Bharat Interface for Money), TEZ (now known as Google Pay), PayTM UPI, and Amazon Pay allowed customers to buy items from shops by scanning the QR code.

Not just customers, large businesses, retail stores, and MSMEs could now accept every customer and not worry about getting the exact change amount. 5 years later, digital payments have helped every business to survive, compete, and grow swiftly.

And today, the retail sector is increasingly embracing digital transformation for improved customer services, offering an elevated experience.

One such initiative, Amazon Pay Smart  Stores has helped offline stores manage the challenges of affordability, credit options, payment problems, and merchant services with ease.

Recently, the Federation of India Micro and Small & Medium Enterprises (FISME) in partnership with Tamil Nadu Small and Tiny Industries Association (TANSTIA) hosted a virtual panel discussion comprising bureaucrats, ministers and industrial experts. The panel was moderated by Mr. Mayank Gaur, Joint Secretary, FISME, to deliberate on how MSMEs in Southern India are revamping and expanding their businesses by adopting smart digital payment channels.

Dr. Ramaseshan R., CA, Director – BHI Capital and Executive Member of The Tamil Chamber of Commerce highlighted how digital platforms have enabled ease of doing business for small players. He said, “Digital platforms like Amazon have enabled businesses to blossom, providing an alternative route and helping adopt ambivalent models of payment. This has enabled merchants to provide a convenient, instant, and rewarding offline shopping experience to their customers.”

Mr. Girish Krishnan, Director, Amazon Pay Rewards, stated, “Customers trust their offline retailers because of touch and feel. But offline retailers face the challenges of affordability, credit options, payment problems, and merchant services. With our Smart Store program, we aim to offer a contactless way for customers to discover products at local shops, make easy payments, get EMIs, and earn rewards using Amazon Pay. We have created a digital storefront for shops, enabling customers to discover products, read reviews, and evaluate offers using the Amazon app.”

This, Mr. Krishnan further commented, “is helping thousands of merchants drive additional footfalls to the store and strengthen their customer loyalty relationship through value-adding propositions, a wide range of payment options, and exclusive brand/bank offers.”

Digital payment adoption in India:

As per the National Payments Corporation of India (NPCI), October 2020 witnessed the highest monthly UPI transactions in India totaling 2 billion transactions worth 3.86 lakh crore. In May 2022, this figure touched 6 billion monthly transactions worth 10 lakh crore. Fascinating, isn’t it?

MSME in India:

MSME is pretty important to our country. Roughly, this sector contributes to 1/3rd of our success. Hence, when they succeed, we as a country succeed.

Owing to their success, on 30th March 2022, the government allocated 6062.45 crores ($808 million) for the RAMP scheme – Raising and Accelerating MSME Performance. This program aims to help MSMEs get a smooth passage in the market so they can grow their business swiftly.

MSME and digital payment adoption:

After demonetization and the pandemic, digital payment adoption has risen. Customers today prefer paying using digital means as it is convenient. Whether you buy an item worth INR 5 or 50,000, digital payments allow you to complete the transaction in a few seconds.  

Did you know?

72% of MSMEs accept digital payments, and 28% prefer cash payments. This number is gradually increasing as more and more MSMEs adopt digital payments.

With the rise of the internet economy,

How does digital payment adoption allow MSMEs to grow?

1. Easy tracking of daily sales & other expenses:

Digital payment adoption allows the business owner to track daily sales. There is an accurate figure, and that helps the owner to understand how the business is faring.

2. Growing client base and visibility:

Businesses that allow customers to pay using digital means get better visibility than those asking for cash payments. As the business gains visibility, new customers start walking in.

3. Using data and reports to improve business:

A business owner can analyze data about daily sales, inventory levels, and digital payments to understand their business. Using this data, they can improve their offerings and pass benefits to customers that make digital payments.

4. Ease of doing business:

It does not matter how small your business is. Allowing digital payments allows you to conduct business with ease and boost profits in the long run.

MSMEs adopting digital payments have a long growth curve than ones that use cash payments. I say this because businesses accepting digital payments also allow customers to pay in cash but cash businesses do not allow digital payments.

Overall, digital payments are the future, and MSMEs that switch to this will survive, compete, and grow better than the rest who stick to the cash payment method.

References:

MSME data – IBEF

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