Digital Payments: Unlocking Potential for Small Enterprises

Digital Payments: Unlocking Potential for Small Enterprises

The Indian ecosystem for digital payments is developing, and the effects are becoming apparent. The percentage of the people using digital payments for small businesses increased from under 5% in 2016 to over 25% in 2019.

The number of transactions has climbed from 100 million to about 400 million, and the number of mobile wallet users has expanded from slightly over 10 million to roughly 220 million since 2015.

Small businesses are the foundation of the global economy, making up almost 98% of all firms. Furthermore, these industries generate 98% of new jobs. 

Only 42% of small and medium-sized enterprises have a strategy plan for retirement and growth, according to an economic assessment. In order to prosper and grow, these firms require access to tools during unpredictable economic times.

We'll examine the factors fueling this expansion, pinpoint the major patterns these shifts are producing, and talk about how any business may capitalise on these developments to create value in the small business sector. This blog article will look at the various ways that digital payments for small businesses can benefit them, including through transactions and the creation of new revenue sources. in a variety of ways, including by lowering payment processing fees, generating new revenue streams, and speeding up and decreasing transactions.

The Fundamentals of Indian Digital Payments

India has a wide range of players in the digital payments space for small businesses, including banks, card networks, wallet providers, and payment gateways. Indian payments are decentralised since the payment systems in China and the United States are centralised.

Businesses need to be mindful of a few issues because the Indian payments environment is decentralised. A corporation must first comprehend the roles played by its stakeholders in order to improve the payments ecosystem. The following stage is to select the appropriate payment partners for its services. 

A look at the factors that have impacted small businesses' use of digital payments

A quick summary of the factors driving the growth of digital payments in India is provided below.

1. Adoption of Card Networks

The use of EMV (Europay, MasterCard®, and Visa®) has increased recently, despite its earlier sluggish uptake. By year's conclusion, EMV terminals accounted for over 75% of all terminals, up from less than 30% of all terminals that accepted cards in 2017.

Over the past few years, credit card use and adoption have increased. Even with all of the accomplishments, this is just the beginning. The market has been set up for exponential growth as a result of the government's push to establish a cashless economy and the implementation of GST.

2. Growth of Digital Wallets

The proliferation of mobile wallets, which are common in the Indian market, has also directly contributed to the rise in digital payments in that country. Wallets are not new to the Indian market, but the government's desire for a cashless society has led to a sharp growth in their use.

From roughly INR 4,000 crores in 2016 to over INR 50,000 crores in 2018, the value of digital wallet transactions has grown, and by 2021, it's predicted to reach INR 120,000 crores.

3. Cut Down on Fraud and Boost Openness

Fraud is one of the main problems small businesses confront. Every year, fraud against corporations results in losses of over $40 billion. One of the reasons this occurs is that there is a dearth of clarity and visibility into the payment procedure.

This issue can be resolved by using a digital payment mechanism, which offers a digital record of each transaction as well as a single source of information. This will guarantee that, in the unlikely event that a transaction takes place, you will have all the information you need to track it down. In the case that there is fraud, you will be able to spot it right away and shut the account right away.

Digital Payment Benefits For Small Businesses

1. Establish New Income Sources

The secret to expanding your company and adding more employment as a business owner is to generate income. Seeking methods to increase revenue is crucial since a stronger source of income is required. You can think creatively and provide services you don't already provide if you wish to achieve this.

For example, if you operate in the financial services industry, you might allow your clients to use your platform to make online payments. By doing this, you can grow your company and create new sources of income.

2. Reduce Transaction Costs and Speed Ups

Your company loses out on potential income every minute that goes by. This is money that could be invested in growing the company or hiring new staff members. One of the ways that digital payments can be useful is by reducing the time it takes to complete a transaction. Thanks to advances like these, you may now significantly shorten the time it takes to complete a transaction thanks to revolutionary technologies like real-time, instant payments.

3. Lower the Cost of Processing Payments

Using a credit or debit card is the norm when making payments for goods or services. For example, in the United States, plastic cards are used for almost 80% of transactions. Even while cash is still the most popular payment method, it is still the most widely utilised for small purchases like groceries and gas.

For a long while, the only way to accept plastic payments was through credit card machines. Regretfully, there was a significant cost and associated expenses with that mode of payment acceptance. Here's where digital payments can come in handy as they provide a more economical method of accepting payments.

Important Learning

Without a question, as India's digital economy takes off, digital payments are evolving quickly. While the use of cash as a preferred payment method is decreasing, the use of digital payment channels—such as credit cards, UPIs, and digital wallets—is increasing.

The government's aim for a cashless economy, the introduction of the GST, the uptake of EMV, and the emergence of digital wallet firms like PhonePe are some of the causes propelling this growth. These changes are probably going to have a big impact on businesses. 

For example, digital payments like Dotmik may increase brand loyalty and customer happiness. Additionally, it can provide new difficulties for companies, like ensuring that payment methods are secure from fraud and that clients obtain value in addition to a simple shopping experience.

There are various ways that small businesses can derive benefit from digital payments, as this article illustrates. If you run your own firm, you need to stay current on the most recent advancements in the payment industry. Your company will be ready for the future and able to capitalise on the newest trends as a consequence.

The good news is that there are currently more choices for making payments than in the past. You can take payments via digital payments on any platform—online, mobile, in-person, etc. You can choose a solution that suits your demands, regardless of the type of business you run.