New Delhi: A recent study conducted by NeoGrowth, a digital lender focused on micro, small, and medium enterprises (MSMEs) in India, revealed that a significant majority of these businesses anticipate a substantial portion of their retail sales to be conducted through the Unified Payments Interface (UPI). The study, titled ‘Decoding digital payments: A retailer perspective,’ highlighted the growing preference among customers for digital payment methods, especially for on-the-go purchases, and their inclination to patronize retailers that offer such options.
According to the study, approximately 70 percent of retailers believe that over 50 percent of their sales will be facilitated through UPI within the next three years. The convenience and ease of use associated with UPI have made it the preferred digital transaction mode for retailers. Notably, retailers in Bengaluru observed a 14 percent surge in UPI usage for digital transactions, followed by Chennai and Hyderabad at 13 percent each, in comparison to pre-Covid levels. Smaller cities experienced a relatively modest 4 percent increase.
When analyzing industry segments, the study found that fast-moving consumer goods (FMCG) and retail witnessed a 14 percent rise in UPI transactions, while food and beverage and fashion and lifestyle saw increases of 12 percent and 9 percent, respectively. Conversely, card transactions experienced a decline of approximately 12 percent across different sectors, with fashion and lifestyle suffering the most significant setback post-pandemic. Larger cities, including Chennai, which were once prominent card users, were particularly affected by this downward trend. The surge in the adoption of contactless payment methods during the pandemic played a pivotal role in the reduced usage of cards.
Among the various payment methods available, UPI emerged as the clear favorite for the majority of retailers, with 70 percent of them expressing a preference for UPI in their digital transactions. Arun Nayyar, the Managing Director and CEO of NeoGrowth remarked on the noteworthy adoption of digital payments by Indian retailers. He emphasized that MSME retailers are increasingly realizing the benefits of embracing digital payments due to their user-friendliness and customer convenience. UPI, in particular, has played a leading role in driving this adoption by meeting the needs and expectations of retailers effectively.
Moreover, more than half of the retailers surveyed reported an increase in sales and an enhanced customer buying experience after incorporating digital payment modes into their operations. Additionally, around 40 percent of retailers stated that digital payments have helped them attract new consumers, further highlighting the positive impact of these payment methods on their businesses.
Overall, the study by NeoGrowth highlights the significant role that UPI and other digital payment methods play in the retail sector. The findings underscore the growing preference for digital transactions among retailers and customers alike, driven by the convenience and advantages associated with these payment options. As the digital payment landscape continues to evolve, it is expected that more retailers will embrace these technologies to enhance their business operations and cater to the evolving needs of their customers.
