Digital payments grow 76%, driven by small towns, says report
Armed with lessons from the pandemic, small businesses are increasingly embracing e-commerce, leading to a rise in digital payments in tier 2 and 3 cities. Digital payment transactions are up 76 per cent in the January-march period of 2021 compared to the same period a year ago, according to a report by fintech firm Razorpay.
The year 2020 brought in the digitisation of small businesses at a much larger scale than demonetisation and they are expected to increase investment in digital technologies in 2021, according to the report.“the last 12 months have been like being inside a time capsule,” said Vedanarayanan Vedantham, head of SME business, Razorpay. “India’s digital payments ecosystem in this timeframe has seen the kind of growth that might have happened over a 3- to 5-year horizon if not for the pandemic.”
The report, titled ‘The Era of Rising Fintech’, said in the first three months of this year, tier-2 and 3 cities and towns continued to contribute over 50 per cent of all online transactions. As tourism opened up, Jammu & Kashmir found itself in the top 10 digitally inclusive states and Union Territories for the first time, with growth of 36 per cent in online transactions in the period compared to a year ago, ranking above Uttar Pradesh, Madhya Pradesh and Haryana.
“A lot of first-time digital users and previously traditional, brick-andmortar businesses have come forward to embrace digital payments,” said Vedantham. Payment options such as Buy Now Pay Later grew 569 per cent in the past 12 months as consumers avoided bulk payments. This is expected to increase transactions for SMBS. The Unified payments interface continues to be the preferred payment option followed by debit cards, credit cards and net banking.
While beginning of 2020 recorded just about 500 transactions in ENACH (electronic national automated clearing house) payments, it saw a growth rate of 23,962 per cent in the 2021 period, displaying a growing trend of businesses preferring digital and automated recurring payment processes. ENACH is a payment service that allows anyone with a bank account to automate recurring payments. Travel industry has also made a comeback, growing 52 per cent. This indicates some stability in the travel and hospitality economy, bringing respite to millions of people working in the sector.in the last few months, consumers have increasingly been ordering online helping the food and beverage industry grow 69 per cent. Schools, colleges and online educational institutes have started accepting online payments for fee and salary payments, recording 40 per cent growth. Real estate saw an increase of 65 per cent after a 14 per cent decline in the last 6 months of 2020 compared to the first six months. Also, mutual funds were the preferred choice of investment for salaried professionals. The industry saw a 69 per cent growth rate in the period, signifying increased interest to save taxes before the financial year ended.
“Small businesses are providing newer payment methods and reaching out to a wider customer base that transcends geographical boundaries,” said Vedantham. “All this is enabled by the convenience of digital payments, and we at Razorpay are humbled to support small businesses in their growth journey as Indian businesses and consumers together begin to build a digitally inclusive nation.”