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How kirana shops are driving the cashless revolution in India

It’s a win-win situation. Customers are keen on contactless transactions for the sake of safety and local grocers are now accepting digital payments for the same reason. And that has taken the volume and value of digital transactions to new highs during the lockdown.

September 07, 2020 / 05:42 PM IST

Customers of Kirti Stores, a small kirana store with a countertop in the posh Pedder Road area in Mumbai, would always pay Amit Chheda, the owner, in cash. That changed in March, when Covid-19 made the grocer shift to accepting digital payments.

“Almost 100 customers come to my shop daily, I don’t want to get exposed to the deadly virus nor put customers at risk. That’s why we decided we will only accept digital payments,” said Chheda. He accepts payments via Google Pay, Paytm, UPI and Phone Pe.

Another Kirana store owner, Harish Gada of Manish Stores, located at Altamount Road in Mumbai, said: “Customers themselves prefer to make payment via digital mode due to safety reasons. That’s why I have downloaded the Paytm and Google Pay apps on my phone. I find it very convenient. There is no hassle of giving change and immediately the money gets transferred into my bank account.”

Kirana stores, India’s traditional neighbourhood shops, sell everything from groceries to branded consumer goods. There are almost 15 million of them in the country and it has always been a cash-led business. However, in the last five months, they have started to accept payments digitally, especially in urban and semi-urban areas.

It’s a win-win situation. Customers are keen on contactless transactions for the sake of safety and Kirana stores are now accepting digital payments for the same reason.

ALSO READ: COVID-19 pandemic prompts kirana store to go digital, survey reveals

What the surveys say

According to a report by RedSeer Consulting, kirana stores drove essential retail consumption through the lockdown. And with the focus on safety, the digital payment market share of grocery stores increased from 60 percent to 75 percent during that time, led by mobile-based payments. The country’s digital payment market was worth around Rs 2,162 lakh crore in 2019-20, Redseer Consultancy said.

The consulting firm expects the merchant payments segment (P2M) to drive digital payments growth and it is set to grow at a CAGR of more than 50 percent until FY25. According to the report, P2M is fast becoming the preference for retailers; Paytm dominates with 50 percent market share followed by PhonePe and Google Pay.

The small merchant will push growth in the payment enabler (EDC & Payment Gateway Aggregator) segment, the report said. From 0.5 crore terminals currently (almost 5x times of FY15), it is expected to grow at a CAGR of 27 percent in the next five years to reach 1.7 crore terminals by FY25. New-age digital players such as mSwipe, Pine Labs, Ezetap, Paytm are leading the charge in this segment, the report added.

As per a 2019 Assocham-PwC India study, the estimated value of digital payments in India will more than double to $135.2 billion by 2023.

A recent report titled Digital Payments India — Short to Medium Term Effects of Covid-19, by Nasscom, noted: “The use of digital payments for everything from groceries to utility bills to cab fares to fee payments, etc across demographically diverse people, has seen a colossal rise due to the virus’s fear.”

According to an EY survey, the pandemic has also led to a renewed trust in the local kirana store with a surge in new consumers visiting local stores both in metros and non-metros, with 79 percent of respondents in non-metros and 50 percent in metros saying new consumers were coming to their store after the lockdown went into force.

In fact, a lot of kirana stores went online and offered home-delivery services.

ALSO READ: Coronavirus pandemic | Retailers begin bulk deliveries to RWAs in some cities: Report

Driving retail consumption

Retail consumption has grown as evident from the profits of FMCG majors such as Hindustan Unilever and ITC in the first quarter of FY21.

Hindustan Unilever registered growth of 7.2 percent in net profit compared to the previous quarter, supported by strong double-digit growth in the foods and refreshment segment. Chairman and Managing Director Sanjiv Mehta had earlier told Moneycontrol that the products that saw the highest demand during the lockdown were coffee, sanitisers, deep cleaning and Kissan brand products.

The Branded Packaged Foods Businesses delivered a robust performance during the quarter, driven by atta, noodles, biscuits and fresh dairy.

Also read: Digital transactions recover in May after initial COVID-induced fall

Fintech firms cashing in

With digital transactions for essential goods rising, fintechs are lining up to work with mom-and-pop stores to enable them to transact digitally.

Innovative business models have emerged encouraging small retailers to adapt to the infrastructure and important features such as Tap and Pay and Cashless Pay via QR code.

The penetration of digital payments is not restricted to the biggest cities but is also being adopted by Tier 2, Tier 3 and Tier 4 cities across the country.

In May, digital financial services platform Paytm launched a loyalty programme for Kirana stores across the country.

Under this programme, all merchant partners who accept online payments via Paytm wallet, Rupay cards and other UPI-based payments apps will receive reward points.

Points collected by the Kirana store merchants can instantly be redeemed for a voucher. They can also be used to purchase merchandise from the Paytm for Business app. The number of reward points will depend directly on the number of transactions done through the Paytm all-in-one QR.

Saurabh Sharma, Senior Vice-President, Paytm, said: “The loyalty programme will encourage kirana stores to accelerate the growth of digital payments.”

FreeCharge has also tied up with kirana stores.

“In partnership with FreeCharge a small business can accept payments through cards, UPI & netbanking, using static & dynamic QR codes or customised payment links. We have signed up a significant number of merchants; small businesses like the local cable service provider, auto service centers and workshops, local kirana stores for home deliveries and gas agencies now use Freecharge payments link for accepting payments which they otherwise collected in cash," Siddharth Mehta, CEO, FreeCharge told Moneycontrol.

Worldline India, a transaction facilitator, recently partnered with Mastercard India and Axis Bank Ltd to launch a digital point-of-sale solution, Soft PoS, to help kirana stores accept payments using their smartphones.

“We have facilitated kirana stores in making everyday processes and transactions easier and much faster. To make it cheaper for the store owners, especially the Kirana store owners, soft POS is playing a major role to promote digital payments and continue to support social distancing,” said Vishal Maru Senior, Vice-President Merchant Payment Services, Loyalty and Digital Payment, Worldline India.

Himadri Buch
Himadri Buch
first published: Aug 26, 2020 11:22 am