[India MSME Summit 2021] How MSMEs have adopted BFSI and contactless payments amidst second wave of COVID-19

It is an open secret that the two waves of the COVID-19 pandemic have accelerated the adoption of digital payments in India.

Digital payments will grow at a rapid pace over the next few years and account for a 71.7 percent share of all payments in India by 2025, according to a March 2021 report by ACI Worldwide, which added cash and cheques will occupy only 28.3 percent share.

During YourStory’s third annual India MSME Summit 2021, Sumit Agarwal, Founder, Vyapar, and Anand Bajaj, CEO, PayNearby, came together to discuss key insights on how BFSI solutions and digital payments acceptance among MSMEs have evolved during the pandemic.

1. Digital builds resilience amidst second wave

With over 5 million downloads on the Google Play Store, Sumit’s app Vyapar helps MSMEs manage business finances, collect payments on time, keep track of inventory, generate GST reports, and more.

Looking at the data present on the app, Sumit said MSMEs using digital payments and Vyapar’s accounting solutions have fared better during the second wave of the pandemic.

“The first wave saw our users’ business impacted by around 70 percent; there was only around 30 percent traction on average. This time, as our users built the mindset of digitising their business, it has flipped - there is around 70 percent traction and 30 percent slowdown among our users,” he said.

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2. Building creditworthiness despite slowdown

Adopting digital payments helps SMBs build a formal financial record, which helps them gain access to a range of financial services. It also helps them establish a digital footprint, which is a criteria required to access finance.

Anand’s firm PayNearby, a division of Nearby Technologies, is a hyperlocal fintech network offering digital financial and non-financial services to the underbanked segments, including MSMEs.

Commenting on how MSMEs can build credit worthiness, Anand said:

“When it comes to MSMEs that are new to credit, there is little data that banks possess to assess credit worthiness. Digital solutions like ours help MSMEs build an alternate credibility score, and this can be harnessed to bring efficiency in their business and also help banks and NBFCs perform risk assessment.”

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3. Digital payments have inculcated a new mindset

Sumit and Anand, who both work extensively with MSMEs each day, said, the impact of the pandemic has inculcated the mindset that MSMEs should leverage online payments and continue running their businesses digitally even if their shops are shut.

Anand said, “Self-doubt among MSMEs impacts their judgment in terms of taking loans. Consumption cycles are muted and will take a while to recover, but digital payments have been a blessing. Whether ATMs worked or not, business carried on with UPI-backed online payments.”

“Just because there is uncertainty doesn’t mean things will stay the same. When the pandemic subsides, MSMEs’ online transaction data populated in the past year can put them in a better position to raise capital,” said Sumit.

According to a report by RedSeer Consulting, online payments in India are expected to grow over three-fold to Rs 7,092 trillion by 2025 from Rs 2,162 trillion in 2019-20. The report attributes government policies around financial inclusion and growing digitisation of merchants as primary factors for the growth.