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Digital Payment Penetration and Acceptance in Tier-II and Tier-III Cities Still Face Some Obstacles

Despite the rise in the number of platforms that enable businesses to offer online payment experience to their customers regardless

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Digital, Payment, Cities
The Unified Payment Interface (UPI) also has been accepted well. Pixabay

Digital payment has been one of the key features of the government’s ‘Digital India’ initiative and online payment platforms and services have indeed spread themselves in the country. However, its penetration and acceptance in the tier-II and tier-III cities still face some obstacles, market players said.

According to Credit Suisse report, India’s mobile payments market is likely to touch $1 trillion by 2022.

Post the demonetisation, whereby Prime Minister Narendra Modi on November 8, 2016 declared that Rs 500 and Rs 1,000 denomination notes would become invalid, digital transactions shot up tremendously. The Unified Payment Interface (UPI) also has been accepted well.

Despite the rise in the number of platforms that enable businesses to offer online payment experience to their customers regardless of location, instrument or mode, still there is a long way ahead as the penetration has mostly been in tier I cities.

Digital, Payment, Cities
According to Credit Suisse report, India’s mobile payments market is likely to touch $1 trillion by 2022. Pixabay

RBI expects the country will have five million active point of sale (PoS) machines by the end of 2021. However, to achieve it, there are several hurdles to be crossed.

“Although the awareness and adoption of digital payments is increasing, the digital infrastructure needs to be strengthened further to ensure consistent reach and penetration across the Tier II and Tier III cities along with rural areas,” says, Sunil Khosla, Head Digital Business, India Transact Service Limited.

According to Manish Patel, Founder and CEO of Mswipe there is a need for easy and cost-effective payment acceptance tools for small and medium enterprises, micro-merchants, especially in tier-III and III cities as a segment, is still under-penetrated.

“They need acceptance tools that are cost-effective and easy to enable. In many cases, it is cumbersome for a micro-merchant to keep tabs of different means like wallets, UPI and bank apps,” Patel said.

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A huge market has grown for products which enable vendors to accept payments through credit and debit cards. However, the ground reality is that although there are around a 100 crore credit and debit cards in the country, the number of PoS terminals is not enough.

Digital payments service providers and adoption of UPI platform by national and international players like Paytm, PhonePe, Google, WhatsApp and Amazon have played a major role in the transition of rural India along with the urban segment in terms of digital payments.

Issues which merchants face are generally related to initial investment and the recurring cost affiliated with acceptance, which can be mitigated by introduction of low-cost devices or device-less acceptance via payment apps for accepting Bharat QR or UPI payments.

Experts further say, MSMEs can generate extra income by offering the entire digital ecosystem with options such as Bharat Bill Payments System (BBPS), Point of Sale machines and micro ATMs along with the digital payment wallets and platforms and payment banks.

Digital, Payment, Cities
Post the demonetisation, whereby Prime Minister Narendra Modi on November 8, 2016 declared that Rs 500 and Rs 1,000 denomination notes would become invalid, digital transactions shot up tremendously. Pixabay

“The acceptance of digital payment collection services can be further improved by simplifying and speeding up of the onboarding process, consistently educating the merchant and consumers on the benefit of accepting digital payments, the various factors featuring in the digital ecosystem and few risks attached to the same,” Khosla said.

Market players and sector experts are of the opinion that EMI (equated monthly instalments) on debit card is going to be the game changer. As only a small section of the population has access to formal loans, EMI on debit card can tap this market and play a significant role. It would encourage consumers to shift to digital payments and opt for easy EMI options. This also enables merchants to offer more affordability solutions to their consumers.

Vicky Bindra, CEO of Pine Labs says: “At a time when our country has set an ambitious growth target in the volume of digital payments, migrating smaller merchants to digital payments holds a key. Hence in order to improve the acceptance of digital payment solutions among merchants, financial services need to create services and refine existing solutions.”

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“It is equally important to educate and create a sense of trust and secure digital payments amongst 500-600 million consumers based out of tier II and tier III cities in India,” Bindra said. (IANS)

Next Story

Emerging Digital Technologies to Generate $1 Trillion in Economic Value for India

Digital technologies across sectors such as retail, financial services, healthcare, energy, manufacturing and infrastructure will be fuelling the growth

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Digital, Technologies, Economic
India is poised to be a game-changer in the world digital economy by empowering its citizens and revolutionizing businesses. Pixabay

Emerging digital technologies are expected to generate $1 trillion in economic value for India — spearheading the $5 trillion economy ambition by contributing 20 per cent to the countrys nominal GDP and sustaining 60-65 million jobs by 2025, an EY report said on Monday.

By 2025, India is expected to have 90 per cent Internet penetration with 850 million users, with rural base growing 2.5 times as compared to the urban base, the report added.

“India is at an inflection point — digital has changed the way people communicate, socialize, create, sell, shop and work. India is poised to be a game-changer in the world digital economy by empowering its citizens and revolutionizing businesses,” said Prashant Singhal, Emerging Markets TMT (technology, media and telecom) and Leader, EY.

Digital technologies across sectors such as retail, financial services, healthcare, energy, manufacturing and infrastructure will be fuelling the growth, resulting in employment generation, increased local and regional entrepreneurship and facilitate equitable socio-economic growth.

Digital, Technologies, Economic
By 2025, India is expected to have 90 per cent Internet penetration with 850 million users, with rural base growing 2.5 times as compared to the urban base, the report added. Pixabay

“Digital economy has the potential to sustain 60-65 million employment opportunities for women, differently-abled people, skilled and semi-skilled workers across digitally enabled businesses in urban, semi-urban and rural areas,” the EY report mentioned.

In the last four years, 268 mobile and mobile component manufacturing units have been set-up, generating 670,000 direct and indirect jobs under the electronic manufacturing initiative.

Domestic electronics manufacturing could generate economic value of $100 billion to $130 billion by 2025, the report said.

The Internet user base in India is expected to reach 627 million by the end of 2019 – second only to China, which is expected to reach about 850 million by 2025.

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However, the Internet penetration is at only 36 per cent – indicating significant growth opportunities.

Rural Internet users are expected to increase by 2.5 times, in comparison to the urban internet users – providing a huge impetus for the next big wave of growth.

The Indian e-commerce and consumer internet sectors are expected to reach $200 billion by 2027 and is a significant avenue to provide employment and build entrepreneurship in the country.

Digital, Technologies, Economic
India is at an inflection point — digital has changed the way people communicate, socialize, create, sell, shop and work. Pixabay

“In 2018, the sector raised over $7 billion in PE/VC capital (including venture debt) across approximately 200 deals, and seven companies reached the coveted unicorn status. 2019 has already seen five companies achieve the unicorn status,” the findings showed.

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By scaling 80 per cent of India’s e-commerce supply chain to digital value chain could generate an additional economic value of $5 billion to $10 billion in 2025, added the report. (IANS)