Payment innovations serving small merchants in India

By Sameer Chugh, Co-Founder and Director, Mosambee

India is on the cusp of a transformative digital payment revolution. Ten years ago, it was not easy to imagine a world without cash. In fact, money was king. However, the introduction of simple, convenient and secure solutions has radically changed the way billions of Indians access and interact with money. Advances in digital payment solutions that support low value payments have made us a real-time payment champion.

The exponential growth of digital payments has demonstrated the impact that simple innovations can have on remote areas of the country. And, the pervasive pandemic has provided the much needed impetus to bring these solutions to last mile operations. With the evolution of all aspects of digital payments, Digital India is poised to contribute 2.2% of the global digital payments market by 2023.

Building a financially inclusive digital economy

Digital payments have become more than just a convenience – they can accelerate business growth. Beyond the ease of transactions, building a financially inclusive digital economy has many economic benefits. For MSMEs, adopting a reliable, accessible and low-cost payment infrastructure can improve digital adoption and help access institutional credit for future business expansion.

Additionally, digital payments can help unlock new revenue streams, manage finances, grow the consumer base, and explore more tools to automate operations. Merchants who can take advantage of the payment infrastructure can gain a competitive advantage through deeper insight.

FinTech companies in India have realized the potential of digital MSMEs and are increasingly developing solutions that can change the face of small businesses. They understand that they need to solve individual problems to drive digital transformation while keeping in mind their larger goal of developing a solution that solves all problems under one roof.

A small innovation that makes a big difference

Even the slightest improvement in the payment infrastructure can provide a huge boost to small businesses. For example, the evolution of the PoS machine from computer-controlled cash register to mPoS and SoftPoS. This is precisely why there has been a significant improvement in the simple yet innovative payment solutions offered to small businesses in recent years. It can be as easy as promoting digital payments. The exponential growth of Phonepe, PayTM & GPay serves as the best examples. Phonepe has kept merchant acceptance at the heart of its strategy and has focused on creating solutions that can empower consumers as well as merchants. In just 5 years since its launch, Phonepe has facilitated 22.4 billion transactions to date across 19,098 PINs and recorded 1.4 billion merchant payments in three months. The best part is that almost 80% of their transactions come from Tier 2, Tier 3, Tier 4 cities and beyond.

The strategy worked for companies like Zyadashop and Dukaan well, although for a completely different product. Zyadashop’s young founder, Satyajit, was taken aback by the process used by small local traders trying to sell their product online. His simple idea was to help traders learn the basics of e-commerce. He presented an application allowing small traders to create an online store for their products online.

Another bottleneck in the integration of digital payment infrastructure was the inability to accept all kinds of payments. Mosambee has tried to solve this problem with solutions such as Tap Phone service which allows merchants to accept all digital payments, including credit / debit cards, without the need for a card dispenser. This purely digital application reduces the operating costs of traders on rentals and maintenance of Point of sale machines.

Today, merchants are not only able to offer digital payment methods, but also facilitate simple IMEs to improve the consumer experience. There are solutions like digital khatabook that allow merchants to digitally manage every process, from accepting payments to recording transactions and managing credit.

Most of these initiatives are hugely successful and receive much needed political support, such as the Indian government’s Digital India policy. These policies not only help fintechs develop solutions, but also help businesses shape the future of digital payment, for example by accepting digital payments without internet connectivity.

However, while India holds a strong position in the global payments space, it has yet to explore the potential of transforming manual, disconnected and unorganized retailers to achieve financial inclusion. We might find it difficult to become a fully cashless society until we develop an ecosystem that ensures that financial services and easy credit are made visible and available to vulnerable and low-income sections through digital media.

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Elaine R. Knight