An increase in access to digital payment options, better telecommunications infrastructure to enable customers to have a “reliable” Internet connection on their smartphones, and large-scale deployment of point of sale (POS) machines can help neighbourhood retail stores speed up their transition to digitisation, says a study.
“Cheaper smartphones and Internet on mobile [phones] can drive digital payments upwards,” said Krishnan Dharmarajan, executive director of the Centre for Digital Financial Inclusion, which conducted the study jointly with the Indian Institute of Management Bangalore. A total of 305 consumers and 88 retailers were surveyed between November 8, 2016 and December, 2016. After December, 1,715 consumers and 535 retailers were surveyed.
On November 8, ₹500 and ₹1,000 bank notes ceased to be legal tender. The two denominations accounted for about 86% of the total value of currency in circulation.
“Around 85% of the consumers had mobile phones, but only 36% had a smartphone and just about 26% used the Internet,” the study said. “Improving connectivity can promote greater consumption of Internet on mobile, which is essential for mobile payments.”
Though a sizeable number of respondents had bank accounts, access to net payments was found to be trailing. “Of the 79% consumers who had bank accounts, only 62% possessed a cashless instrument and 43% had debit cards,” the study said.
Meanwhile, 97% of kirana (small shop) retailers, who account for a large chunk of the country’s informal economy, had a bank account, but only 41% had debit cards. “Card issuers and service providers have to identify means to increase the penetration of digital payment instruments. There is a big opportunity to create products for retailers,” said Mr. Dharmarajan.
Need for POS
The study said digital payments can be increased substantially if digital payment acceptance infrastructure (such as POS machines) is made ubiquitous. “Kirana retailers have to be educated on [this infrastructure] — what to acquire, where to acquire and how to acquire and use,” it said.
According to Mr. Dharmarajan, following demonetisation, digital payments probably “resonated more than ever before, leading not only to increased usage but also to better awareness about them”. “Customers’ interest in cashless systems appeared to be driving retailers’ plans to adopt cashless systems,” he said.
The study also revealed that the use of banking products such as credit loans and overdraft facility, and receiving of customer payments into retailer accounts, was relatively low. “Overall, about 5% of the kirana retailers availed credit or loan from banks, and less than 1% availed overdraft facility,” it said.
“The average purchase value by a consumer on a single visit was ₹100 or less in more than 75% of the kirana stores. Also, consumers visit a kirana store more frequently than they visit an organised outlet. So this is a segment which cannot be ignored on the cashless journey,” the study said.
