By Amit Tyagi
Credit and finance for MSMEs: Digital payments is a clear area where India has emerged as Vishwa Guru. The government has taken a wise approach to building digital infrastructure in line with physical infrastructure leveraging the successful ‘PPP model’ – Public Private Partnership. In this approach, the government builds or aids in building public platforms and utilities – ensuring that there are no monopolies in the space of public goods – and then invites the private sector to leverage these by building consumer-facing solutions on top of these platforms. Of course, UPI is the poster child of this approach, and why should it not be, after all, it is a relatively nascent product which delivered 7.82 billion transactions in the month of December.
However, it remains imperative that the fruits of this approach should not just be restricted to the urbanized and digitally savvy population but rather be distributed equitably among all sections of the country and society. There are some clear actions being taken toward this and they will define how 2023 will shape the landscape of digital payments for retailers and small merchants.
Also read: Explained: How fintech can be a game changer for MSME lending and finance
Simplified, ‘native’ product designs to enhance usage of digital payments
In the digital world, user design has often followed a skeuomorphic approach – while this may enable faster user understanding in more developed economies, copying the same in an Indian context will leave the users befuddled. Case in point, is the usage of a shopping cart icon in e-commerce apps, how many Indian consumers do you think have ever come across, let alone use, a shopping cart in their day-to-day life? Our product designers will have to ensure that while designing products, they keep Bharat consumers in mind. Some steps are being taken in this general direction: In 2022, NPCI launched UPI123Pay, allowing feature phone users to use the UPI platform. The launch of UPI123Pay points toward the further adoption of digital transactions in the countryside, where most citizens still do not own smartphones. UPI123Pay will make UPI accessible to a section of society so far excluded from the digital payment landscape.
The other vector for digital payments to make further enhancements is security. As the adoption of digital payments grows, it is important to earn and keep the trust of those who are new to these modes and hence their confidence in these products may be shallow. This can only be done by striking the right balance between security and convenience. Investments in security will ensure that customers acquired will stick to these modes for longer thereby improving the economics of serving these customers. So, working on security is not just a consumer and societal imperative but also a business imperative.
Also read: UPI: P2M transactions cross 400-crore mark in December
Payments as a stepping stone to credit
Payments are an important leg but now that we have built on payments, it is important to leverage the vast payments data to move customers from being underserved to fully served for their banking needs, especially credit. As Nandan Nilekani famously said, Indians will be data-rich before they are economically rich; it is important for us to tap into these huge data sets with the consumer consent and leverage them to provide growth capital to small businesses. A small business may not have collateral to offer to the bank but with the adoption of digital payments, there is enough data to assess the business cash flows and underwrite basis those.
Amit Tyagi is CEO of Payworld. Views expressed are the author’s own.