E-payments: taking kirana stores digital

Manjunath, a small kirana store owner in Bengaluru, had a flourishing business since he owned
the only such store in the neighbourhood. However, over the last few years, his business took
a hit because of economic chan­ges like demonetisation and proliferation of technology and internet led payment solutions.

In an effort to address the dip in sales and retain his customers, Manjunath started selling goods on credit to loyal customers. This strategy did not work well for him as, eventually, he started facing a shortage of cash, which ultimately led to delayed payments to his suppliers. After hearing about the different modes of digital payments from his customers, Manjunath finally adopted the BHIM platform.

It has been six months since Manjunath started accepting digital payment and his business has already seen a significant boost. His customers can send money directly to his bank account, which he directly sends to his suppliers. The entire process has not only become very easy but has also enabled him to keep records of all transactions.

Manjunath is one of the many small kirana store owners who adopted digital payments post demonetisation. These solutions have not only made payments seamless and hassle-free but also decreased the dependency on cash. Studies show that the proportion of cash transactions of total consumer spending in the country has reduced from 78% in 2015 to 68% in 2017, thus indicating the growth in the adoption of digital payments.

Adopting digital payments enables merchants to attract more customers while increasing transparency in the maintenance of records. Moreover, it allows them to settle transactions easily and quickly. There is also the added bonus of increased security without worrying about handling large amounts of cash as well as smoother and seamless transactions between accounts.

To further aid contactless and cashless transactions, many Fintech companies and startups have introduced innovative alternative modes of payments like digital wallets, quick response (QR) codes, near field communication (NFC) technology, sound wave systems, and virtual cards, among others.

QR codes have played an integral part in the digital transformation journey for small merchants. Many players have launched interoperable QR codes that allow customers to pay using UPI from any payment app available on their mobile phones. With only a click of a button, customers are able to send money directly to the merchant’s bank account, thus surpassing any extra charges levied during digital transactions.

The penetration of digital payments is not only restricted to urban India but is also being adopted by Tier 2, Tier 3 and Tier 4 cities across the country. NFC technology-based solutions have been instrumental here. Customers can transact even if they have low internet connectivity and do not require high-end mobile phones for this.

Rise in rural consumers

A study by the Centre for Digital Financial Inclusion at Institute for Financial Management & Research (IFMR) in collaboration with researchers at Digital Innovation Lab, IIM Bangalore, has reported a jump in the number of rural consumers willing to use mobile payments, post demonetisation on a par with their urban counterparts.

While the offline mass sector continues to be dominated by 1.2 crore small retailers, it has increasingly become imperative for them to embrace digital technologies in order to compete with the convenience offered by ever-growing online hyperlocal businesses. Store owners are recognising the benefits to their business of having a digital payment infrastructure.

Interestingly, hyper-retailers are also enabling small kiranas by encouraging them to adopt alternative modes of payment and shop on B2B e-commerce sites to make direct and secured payments online without sharing bank details. Many Fintech companies are also empowering these small players by creating a digital presence as well as CRM opportunities, which is key for any kirana store to stay relevant in today’s digital age.

With digital payments becoming the norm, innovative business models are likely to emerge, encouraging small retailers to adopt the infrastructure. However, there are challenges ahead as the approach of a ‘one size fits all’ template cannot galvanise the merchant digital payments at scale.

Current trends indicate that digital payments are the way forward and research indicates that the number of merchants accepting card payments has more than doubled in the last two years to cross three million. While there is still a long way to go to achieve the government’s vision in making India a cashless economy, this is a step in the right direction.

(The writer is Head – Unorganised Business, PhonePe)