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City retailers reshape payment landscape by going cashless
Even as the trend catches on, merchants point out to lack of awareness about digital payments among majority of patrons except young customers.
By
migrator
migrator
Chennai
Three years post demonetisation, an economic reform that is said to have heralded the age of digital payments in India, the cashless ecosystem of the country seems to be evolving in a promising manner. From the proliferation of apps such as PayTM, Freecharge, PhonePe and the government’s own BHIM, to kirana shops and itinerant vendors latching onto the swipe and pay mode, the mantra for going cash-free has been picked up by the masses, albeit in a gradual way.
Take for instance Google, which runs a digital payment service called Google Pay. The two-year-old product on Thursday found itself in a new iteration when the company rolled out a merchant-focused app – Google Pay for Business. According to an official, the app’s monthly active user-base (MAU) grew three times in just a year to reach 67 million in Sept 2019 from 22 million in Sept 2018.
Giving an overview of the speedy adoption rates of the app among small and medium businesses (SMBs), and retailers in the unorganised sector in the city, Sajith Sivanandan, MD and Business Head, Google Pay and Next Billion User Initiatives, told reporters, “Merchants in Chennai are among the top adopters of Google Pay for Business in India. Approximately 2 out of 3 transactions on Google Pay come from beyond India’s 7 largest cities – from over 300,000 villages, towns and cities.” The nation transacted over $110 bn per year (Sept 2019 annual run rate in transaction value) on Google Pay.
That just seems to be the tip of the iceberg. Last week, the National Payments Corporation of India (NPCI) said the number of transactions on the Unified Payments Interface (UPI) breached the landmark figure of 1 billion in October alone, outpacing all other digital payment modes. In a release, NPCI said, “The total transactions of UPI jumped to 1.15 bn in October 2019 from 0.96 bn in September 2019.” UPI transactions had grown 60 times in the last 24 months. Also, the total transaction value of UPI stood at Rs 1.91 lakh crore during the month, up from Rs 1.61 lakh crore in the previous month. About 5.35 billion UPI-based transactions were recorded in 2018-19 as compared to 915.2 million in 2017-18, NPCI said.
UPI was pitched as a medium to allow users to transfer money on a real-time basis, across multiple bank accounts without disclosing the details of one’s bank account to the other party. The idea was to deliver a simple, safe, cost-effective mobile-based payments system, and it has now turned into a channel of convenience for those keen on a cash-free experience.
Dilip Asbe, MD & CEO, NPCI, had said back then that it was encouraging to witness digital payments being widely accepted across the country. He said, “This achievement is a result of the continued support that UPI has received from the ecosystem including banks and third-party payment apps and the policy initiatives by government and RBI in the digital payments.”
Going one step further to accelerate the adoption of digital payment, UPI has introduced new and improved enhancements such as P2PM as new transaction type and IPO application through UPI as a new use case.
On the merchant front in Chennai, the shift to digital has opened new vistas for many traditional retailers. P Sukumaran, Secretary, Vegetable, Flower and Fruits Merchants’ Association, Koyambedu Wholesale Market tells us, “Digital payment apps are slowly gathering traction among vendors at this market. Around 25 per cent sellers here accept payments using one or the other app. Interestingly, a few farmers from rural parts of TN are warming up to the idea of a cash-free market. Being a heavily cash-reliant sector, only 1 in every 4 farmers accepts digital payments for the produce they sell here.”
When it comes to the question of customer segmentation, the digital payment landscape seems to showcase a different picture. Gavaskar M, who runs a provisional store at Kasimedu said, “Except for young customers, the millennials, so to speak, I don’t see a huge awareness about digital payments among the majority of my patrons. Most of them still prefer carrying cash. So essentially it waters down to just 10 pc of my customer base.” A similar sentiment is echoed by Brinda Jain, a copywriter, who prefers using Uber or Ola for her office commute. She said, “Digital wallets worked wonders for us the first few months post demonetisation. After that, it became a constant back and forth between riders and drivers, who balk at the mention of digital payments. The latter keep complaining that their digital payments get credited too late, leaving them with nothing to take home at the end of the day.”
RBI invites applications to test new products for retail payments
Earlier this week, the RBI invited applications for testing new products and services for retail payments system under the regulatory sandbox scheme. In August this year, the apex bank had permitted start-ups, banks and financial institutions to set up a regulatory sandbox (RS) for live testing of innovative products in areas like retail payments, digital KYC and wealth management. “The adoption of ‘retail payments’ as the theme is expected to spur innovation in digital payments space and help in offering payment services to the unserved and under-served segment of the population. Migration to digital modes of making a payment can obviate some of the costs associated with a cash economy and can give customers a friction-free experience,” it said. The innovative products/services which, among others, will be considered for inclusion under RS, like mobile payments include feature phone-based payment services, offline payment solutions (as internet connectivity issues remain unresolved in large areas), and contactless payments. The objective of the regulatory sandbox is to foster responsible innovation in financial services, promote efficiency and bring benefit to consumers.
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