The ‘as good as cash’ UPI payment mode is here to stay

UPI payments seem well set to rule the digital payment landscape in India. Approximately 70 per cent of MSMEs believe that more than half of their retail sales will be via UPI. Even customers are preferring on-the-go purchases using digital payment methods and they are more likely to go to retailers who offer this option. A recent survey suggests that seven of 10 retailers believe over 50 per cent of their sales will be done through UPI in the next three years, which gives an indication of the magnitude of the volume and value. The survey, an eye-opener of sorts, was conducted by NeoGrowth, an MSME-focused digital lender in India. There is no denial that there has been a remarkable adoption of digital payments among retailers. MSME retailers are increasingly recognizing the benefits of using digital payments, especially because customers find it the most convenient payment mode. UPI is spearheading the adoption of digital payments among retailers by ticking all the right boxes. The MSME sector needs to be supported by all means to leverage the power of digital payments in order to improve their financial health and business growth. Digital payments are a powerful tool to extend credit to under-served and un-served retailers.

There are more reasons than one to believe that Indian retail landscape is well-positioned for a bright and prosperous future. Interestingly, the recent study also indicates that retailers are increasingly favouring digital transactions, with UPI being their preferred mode due to the convenience it offers to customers and the speed of payment for retailers. After all, instant receipt of payments and convenience to customers were the top motivators for retailers to embrace digital payments. More than 50 per cent of retailers said that by adopting digital payment modes, they have seen an uptick in their sales and an improved buying experience for the customer. About 40 per cent of retailers have also stated that digital payments have fetched them new consumers. Quite significantly, as UPI transactions take over, the proportion of card payments is heading southward. In fact, card transactions have experienced a decrease of around 12 per cent across industry segments and approximately 16 per cent across different locations.

Industry segments such as fashion and lifestyle have dropped post-pandemic. The decline is most pronounced in bigger cities like Chennai, which were among the top card users. The ongoing trend of consumers adopting contactless payment methods, which gained momentum during the pandemic, has been a key contributor to this decline in card usage. Most retailers prefer UPI over other payment methods while 70 per cent of retailers prefer UPI for digital transactions. In another significant development, digital payments have also enabled new-age digital lenders to use retailers' digital transaction histories to determine their creditworthiness. An encouraging sign is that almost 40 per cent of retailers now prefer to use digital payments to repay their loans.