About 70% MSMEs Believe UPI Will Be Driver Of Retail Sales

A total of 70 per cent of micro, small and medium enterprises (MSMEs) believe more than half of their retail sales will be via UPI, according to a study by NeoGrowth, an MSME-focused digital lender in India.

The study titled ‘Decoding digital payments: A retailer perspective’, mentioned that customers today prefer making on-the-go purchases using digital payment methods and are more likely to buy from retailers who offer this option. 

About seven out of ten retailers believe over 50 per cent of their sales will be done through UPI in the next three years. The study indicated that retailers are also increasingly favouring digital transactions, with UPI being their preferred mode due to the convenience.

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

The fast-moving consumer goods (FMCG) and retail segment witnessed a 14 per cent increase in UPI transactions, followed by food and beverage at 12 per cent and fashion and lifestyle at nine per cent.  

The report also stated that card transactions have experienced a decrease of around 12 per cent across industry segments and approximately 16 per cent 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 per cent of retailers prefer UPI for digital transactions.  

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 recognising 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."

Meanwhile, more than 50 per cent 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 per cent of retailers have also stated that digital payments have helped them attract new consumers.