Street Smart: Vendors embracing Digital Payments

In the 21^st century there is a rapid increase in the integration of technology with the daily life of people. Transactions are also transforming over a period from cash payments to digital payments catering to the needs of people adapting to their changing environment. Presently India stands at 3^rd position for the total number of digital payments made by its citizens. From the world ranking position, we can state that the modernization and adoption of online payments in India are comparatively more than the rest of the world. Vendors in India constituting around 11% urban workforce or an estimated 10 million are also adapting to the changes in consumer payment methods and only 5% of vendors in FY2016 used online payment platforms, which has increased to 15% of vendors in FY2021 and estimated increase to 20% in FY2022.

The major reasons for the adoption of online payments by vendors are:

Daily expense tracking made easy: : Adopting online payments allows the vendor to track his daily earnings and expenses from their transaction history. And this platform is an opportunity for vendors to save their money in the formal economy (stock market, Fixed deposit, Bonds). A survey conducted by an educational institute in Bangalore shows that the major reason for adoption of digital payments is its convenience and ease of use. Demonetization: A ban on 500 and 1000 Rupee notes in India resulted in an acute shortage of physical money and intensified the need for various customers and vendors to temporarily adopt cashless payments. But extended after experiencing the ease and advantages of digital payments.
Covid-19: In the recent pandemic, avoiding physical contact while delivering objects and transactions due to the spread of the virus pushed the vendors and customers to make daily transactions digitally. Even the government advised its citizens to adopt digital payments to curb the further spread of covid-19 by making physical contact. In a survey conducted by KPMG, it was denoted that 81% of its respondents have increased using digital payments.
Governmental policies: The government is constantly advising its people to use online payments to understand its advantages as it facilitates transparency and money circulation in the economy. Recently the Government of India launched the PM SVANidhi scheme in which vendors will be able to take loans for their working capital requirements. This is a huge step taken by the government as this scheme not only provides subsidized short-term loans to vendors but also a tool to make vendors use online payment systems. Users of the PM SVANidhi Scheme would also get access to government schemes such as the Ujjwala gas scheme, and Ayushman Bharat in the future. Some analysts and experts said that the data collected by PM SVANidhi will be used as a tool to construct future schemes for vendors. Also, implementation of UPI and abolition of MDR CHARGES (Merchant discount rate) till certain transaction value has removed charges levied on vendors for using online platforms to receive or pay any amount digitally.

Way to go for a cashless future

Even though there is a tremendous rise in vendors using the digital payment system, still many people hesitate to adopt the digital payment system due to the fear of losing money as they lack education on how to accept or pay digitally. As PM Shri. Narendra Modi said “Now digital transactions worth Rs 20,000 crore are taking place daily in our country. In March 2022, UPI transactions reached Rs. 10 Lakhs crores” and urged the youth of India to help uneducated vendors in using the digital payment platform.

Recently RBI in partnership with NPCI launched a mobile payment system for non-smartphone users called “UPI 123PAY”. This new platform will boost digital payments in the rural population where the majority are non-smartphone users and people who are unable to buy a smartphone. Many private entities are also innovating and making payment platforms more reliable, secure, and customized to help, safeguard and enhance the user experience. Variuous digital payments platforms are helping and training vendors to shift from old cash transactions to the new digitized online payments system.

Conclusion: Indian digital payments system is more advanced compared to most countries and made 7,422 crore digital payments in FY22 at 33% growth rate. RBI is presently working on integrating the credit card system with UPI which provides credit penetration into digital payments. India needs to innovate and adopt more digital payments to withhold its title of World Leader In The Field Of Digital Payments.

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