India continues to be the ‘land of promise’ for a robust digital payments ecosystem. The turn of events in 2020 accelerated the growth trajectory of digital payments as they were perceived as safe and convenient modes of payment. The sudden growth in e-commerce sales and online retail added to this trend. While this is a composite score that reflects many facets of the digital payments ecosystem, it also reaffirms the permanent and strong shift that we are witnessing, – that we are all poised for a truly digital revolution.
With the government laying down the foundation for ‘Digital India’ with the help of affordable smartphones, cheap data, low-cost internet and 1.25 billion KYC-enabled Aadhaar accounts, the financial architecture is in place. India’s payment landscape has seen a dramatic shift, from a cash-reliant society to a digital-first economy. Due to the rapid development of digital infrastructure, UPI-led migration to digital, pandemic-led acceleration of shifts in consumer preferences, expanding merchant acceptance network, and disruptive innovations by fintechs, 40% of payments (by value) are now digital.The digital payments market in India will more than triple from $3 trillion to $10 trillion by 2026, according to a new estimate by Boston Consulting Group.
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Despite this rapid expansion, there is still significant untapped market potential in some niches. According to data from the previous two years, which showed that Tier 3-6 cities accounted for almost 60–70% of new mobile payment clients, the next wave of growth is projected to originate from these regions. Merchant-led payments are predicted to be the drivers of this growth, especially in the offline sector, due to the explosion of QR code payments, which has risen by over 45% since 2018. Also, the greater expense of taking cash may encourage firms to switch to electronic payments. Due to the lack of a merchant discount rate (MDR), cash is accepted at the point of sale for no charge. However, accepting cash comes with a number of indirect costs, including the cost of safe transportation and bank deposits, the cost of theft and handling errors, and labour costs for collecting and reconciling cash payments. Merchants would use digital payments as a result of the inexpensive cost of QR code installation and maintenance with sustained MDR (now nil for UPI).
However, there is a critical need for technological developments in order for merchants to stay up with the rising demand. This prompted the development of soundboxes, which are essentially portable speakers that allow UPI users to scan merchant QR codes and make UPI payments while alerting multitasking shopkeepers and assistants to the occurrence of a transaction. Soundboxes, used by merchants to emit sounds every time a mobile payment is made, have taken off in India. The devices allow for more staff members to be alerted about transactions quickly and efficiently, helping shops get through busy periods without having to call out customers.
Multiple payments players have come up with soundboxes, which produces sounds whenever a mobile payment is made. These are expected to be a big draw for MSMEs in the months ahead, especially in tandem with government initiatives to ensure efficient cashless transactions.
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Soundboxes are becoming a popular payment method, as merchants no longer have to check their phone to see whether the customer has paid. The soundbox just gives you an alert when the payment has been received. Merchants and retailers have got a soundbox for their stores.It is a small portable speaker that makes it easier for them to track their payments, using both wearable devices and smart speakers alike. The wearable payment devices will ease out the payment process for vendors and sales representatives with smart businesses. Both payment options aim to deliver a better customer experience, while enhancing operations of your business.
The integration of UPI and QR code has made it easy for merchants to accept various payments. The PoS machine is a functional device that includes a debit and credit card reader for accepting payments, now packed with many more additional services. By providing solutions like UPI, QR Code and payment sound box, it allows merchants to accept a variety of payments through any UPI app, digital wallets and other digital mediums. Fintechs provide MSMEs with additional value added services including store management and inventory management apps, which helps them to streamline their operations. In other instances, fintechs can help MSMEs develop a digital banking strategy since they have a large database of customers and businesses at their disposal. This allows them to provide high quality, affordable financial offerings at the last mile.
With these same technologies, Fintechs can also offer tailor-made solutions to their customers such as daily repayment models and other features that meet their needs for better credit management. Businesses and customers are interested in payment solutions that take online payments, work beyond OTPs, clicks, manual authentication and internet, etc.
In order to encourage UPI use in India, the Reserve Bank of India has proposed to permit all inbound travellers to India to use UPI for their merchant payments while they are in the country. In addition, it is encouraging banks to promote use of this payment system over other alternatives.
Fintechs are the key to unlock the hidden potential of digitisation by embedding finance into the grassroots of the country by making online payments omnipresent.
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