NeoInsights Study: 70% MSMEs Believe UPI Will Be the Driver of Retail Sales

70% MSMEs Believe UPI Will Be the Driver of Retail Sales

NeoInsights study titled ‘Decoding Digital Payments: A Retailer Perspective’

  • Close to 80 percent retailers use digital payments for customer payments due to convenience
  • 40 percent retailers now prefer to use digital payments to pay back loans
  • Cards are only preferred by 1 out of 4 retailers

Mumbai, May 16th, 2023: 70% MSMEs believe more than half of their retail sales will be via UPI, was the key revelation of the NeoInsights study titled ‘Decoding Digital Payments: A Retailer Perspective’, released today by NeoGrowth, an MSME-focused digital lender in India.

The study was based on a comprehensive assessment of NeoGrowth’s customer data set of ~3000 retailers along with a survey of ~1000 retailers across the nation. The study covered the digital payments adoption behaviour of Indian retailers across 25+ cities and 70+ industry segments.

Arun Nayyar, Managing Director and CEO, NeoGrowth, said “There has been a remarkable adoption of digital payments among retailers in India. MSME Retailers are increasingly recognizing the benefit of using digital payments in their business driven by ease of use and customer convenience. UPI is spearheading the adoption of digital payments among Retailers by ticking all the right boxes. We, at NeoGrowth, will continue to support the MSME sector to leverage the power of digital payments to improve their financial health and drive business growth. Digital Payments are a powerful tool to extend credit to underserved and unserved retailers. We are confident that the Indian retail landscape is well-positioned for a bright and prosperous future.”

UPI Payments set to rule the digital payment landscape in India

Customers today prefer making on-the-go purchases using digital payment methods and are more likely to buy from retailers who offer this option. 7 out of 10 retailers believe over 50 percent of their sales will be done through UPI in the next three years.

The study indicates that retailers are also increasingly favouring digital transactions, with UPI being their preferred mode due to the convenience it offers to customers and the speed of payment receipt for retailers.

UPI adoption soars as more Indian retailers embrace digital payments

Retailers in Bengaluru saw a 14 percent increase in the share of UPI among their digital transactions, followed by Chennai and Hyderabad at 13 percent each compared to pre-COVID levels. Smaller cities only experienced a 4 percent increase.

The FMCG and retail segment witnessed a 14 percent increase in UPI transactions, followed by Food & Beverage at 12 percent and Fashion & Lifestyle at 9 percent which can be attributed to the retailers’ ability to accept digital payments easily and the increased comfort level of their customers in transacting digitally.

Decline in proportion of card payments as UPI transactions take over

Card transactions have experienced a decrease of around 12 percent across industry segments and approximately 16 percent across different locations. Industry segments such as fashion and lifestyle have dropped post-pandemic. The decline is most pronounced in bigger cities like Chennai, which were among the top card users. The ongoing trend of consumers adopting contactless payment methods, which gained momentum during the pandemic, has been a key contributor to this decline in card usage.

The majority of retailers prefer UPI over other payment methods; 70 percent of retailers prefer UPI for digital transactions.

Speed and ease continue to drive digital payment adoption

Instant receipt of payments and convenience to customers were the top motivators for retailers to use digital payments.

More than 50 percent of retailers said that by adopting digital payment modes, they have seen an uptick in their sales and an improved buying experience for the customer. About 40 percent of retailers have also stated that digital payments have helped them attract new consumers.

Better creditworthiness by broad-based use of digital transactions by retailers

Digital payments have also enabled new-age digital lenders to use retailers’ digital transaction histories to determine their creditworthiness. An encouraging sign is that almost 40 percent of retailers now prefer to use digital payments to repay their loans.

Digital Payments continued to thrive despite infrastructural challenges

The major hindrance faced by more than half of retailers were failed transactions, followed by the high cost of the machine and online fraud concerns. Promoting digital transactions among retailers will entail providing the necessary regulatory and infrastructural thrust to overcome these challenges.

You can read the full report here:

 About NeoGrowth:

NeoGrowth was founded by Dhruv Khaitan and Piyush Khaitan a decade ago. NeoGrowth is a new-age lender, with a focus on Micro, Small, and Medium Enterprises (MSMEs). It is a Systemically Important, Non-Deposit taking Non- Banking Financial Company (NBFC-ND-SI), offering a wide range of products tailored to the dynamic needs of small businesses. Its data science and technology-led approach enable it to offer quick and hassle-free loans to MSMEs across 70+ segments across 25+ locations in India. NeoGrowth offers a unique daily repayment option to its customers with multi-channel repayment modes. It has served and engaged with 1,50,000+ businesses and supported them with their growth ambitions. It not only helps small businesses grow but also drives financial inclusion making a positive social impact.

Founded by industry veterans, its Board of Directors comprises experts, who guide the leadership team toward its strategic goals. NeoGrowth is also backed by renowned investors, namely Omidyar Network, Lightrock, Khosla Impact, Accion Frontier Inclusion Fund – Quona Capital, IIFL Seed Ventures Fund, WestBridge, FMO, and Leapfrog Investments.

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About NeoInsights

Having served the needs of 1,50,000+ MSMEs since inception, NeoGrowth has deep customer connects across 70+ segments PAN India. Over the years, the company has gathered a large pool of data on MSMEs and the intelligent insights derived from this data is key to creating an enabling credit ecosystem for the MSMEs. Under NeoInsights, the company leverages its primary data and other sources to identify new and interesting trends on India’s evolving ecosystem, published in various formats, to ignite new ideas and share MSME sector trends with the industry.

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