Digital Payment Adoption among Small Traders in Assam

A. Introduction

Digital payments have revolutionized the way financial transactions are conducted in today's increasingly digital world. These payments involve the transfer of money from one account to another using electronic methods, eliminating the need for physical cash. The proliferation of smartphones, internet connectivity and advanced financial technologies has accelerated the adoption of digital payment systems globally.

During the inauguration of the 'DigiDhan Mela' on 31 December 2016, Prime Minister Narendra Modi had launched BHIM UPI App and urged people to make digital payments a habit to transform the country into a cashless economy. The digital revolution has significantly transformed the way business operates world-wide and India too. Digital payments, facilitated by advancements in technology and infrastructure, have become increasingly prevalent, offering convenience, security and efficiency.

UPI stands for Unified Payments Interface. It is an Indian instant payment system as well as protocol developed by the National Payments Corporation of India (NPCI) in 2016. 

Some of the popular UPI apps in India are:

• PhonePe

• Google Pay

• BHIM

• Amazon Pay

• BharatPe

The adoption of digital payments among small traders in Assam holds significant importance due to various factors. Firstly, digital payments offer unparalleled convenience through their speed and efficiency. Unlike traditional payment methods such as cash or cheques, digital transactions are swift, reducing the time required for each transaction and thereby enhancing overall business operations. Moreover, digital payments are accessible anytime and anywhere with internet access, making them highly convenient for both consumers and businesses. This flexibility supports business continuity and customer satisfaction by enabling seamless transactions.

Secondly, digital payments provide enhanced security, which is crucial for small traders. By reducing the need to carry large amounts of cash, digital payments significantly lower the risks of theft and loss. Advanced security features such as encryption, tokenization, and biometric verification offer a higher level of protection compared to cash transactions, ensuring that financial data remains secure and reducing the likelihood of fraud.

Lastly, the adoption of digital payments contributes to economic growth. Digital transactions streamline business processes, leading to cost reductions and improved efficiency. This not only benefits individual businesses but also boosts the overall economic efficiency of the region. Furthermore, digital payments help bring more transactions into the formal economy, increasing tax revenues and reducing the size of the informal economy. This shift supports better governance and resource allocation, fostering a more robust and transparent economic environment.

B. Objectives of the Study

As a part of this Study, a field survey was conducted among 50 small vendors and traders in Guwahati, Assam. The assumption underlying the approach was that the data collected from the sample can be transformed and aggregated to shed light on the general issue under study. 

The objectives were:

• Get insights about what sort of digital payment methods are accepted by the small vendors and traders of Assam.

• Get insights about the most used digital wallet among the traders.

• Gain knowledge about how quickly the traders of Assam have coped with digital payments.

C. Findings of the Survey

C.1. Demographic Profile of Respondents

A significant portion of the traders belong to the middle age group of 30 to 50 years. Many within this demographic have limited educational backgrounds, which can contribute to a more traditional mindset regarding business practices. However, there is also a notable presence of younger individuals among the traders. The respondents in this study included a diverse range of small business owners, such as grocery store owners, meat shop owners, fruit stall vendors, gift and stationery shopkeepers, pan and cigarette vendors, food stall operators, and service providers like mobile phone and electronics repair technicians.

C.2. Current Status of Digital Payment Adoption

The adoption of digital payments in Assam has seen significant growth in recent years, driven by government initiatives like the Digital India Campaign, increasing smartphone penetration, and the efforts of financial institutions to promote cashless transactions.

According to the survey, around 90 percent of small traders and vendors in Assam have adopted UPI for accepting transactions. Various digital wallets are available for vendors, with PhonePe emerging as the most commonly used platform. The data reveals that 70 percent of the respondents use PhonePe, as illustrated in the graph below.

C.3. Motivations for Adopting Digital Payments

Several motivational factors have driven the adoption of digital payments among small traders in Assam. Chief among these is convenience, allowing traders to handle payments seamlessly without the need for physical cash. Faster transactions also contribute, enabling quicker processing and reducing wait times for both traders and customers. Another reason is customer demand, as more consumers prefer the ease of digital transactions. Additionally, the enhanced safety and security provided by digital payments, such as reduced risk of theft and advanced security features, further motivate traders to embrace these modern payment methods.

C.4. Transaction Analysis

This data reflects the percentage of payments made via digital wallets across different types of small businesses. According to the survey, grocery stores see 31-50% of their transactions conducted through digital payment methods. In contrast, pan and cigarette shops report a lower range of 10-30% for digital transactions, primarily due to the small average transaction amounts of Rs 20-50. Additionally, many teenagers prefer to avoid recording their purchases of tobacco products, contributing to the lower adoption of online payments in these shops.

Most vendors (62%) started to accepting digital payments in the past 1-2 years, which is evident in the chart given below.

C.5. Challenges in Digital Payment Adoption

The respondents faced several challenges in accepting digital payments, including technical issues, lack of customer awareness, transaction fees, security concerns, and difficulty in understanding the system. Among these, the most significant challenge was technical issues, particularly server and internet connectivity problems. This was closely followed by difficulties in understanding the system, which stemmed from a lack of financial literacy and knowledge about fintech services. These challenges are highlighted in the chart below.

C.6. Satisfaction Levels and Perceived Impact

The survey results indicate that 62% (31 respondents) are satisfied with accepting online payments. Additionally, 30% of the respondents are very satisfied, while 8% have a neutral attitude towards digital payments. This distribution is illustrated in the chart provided below.

C.7. Recommendations

Through this survey, it was found that while local vendors in Assam have rapidly adopted online transactions, financial literacy remains inadequate. Many vendors, particularly those aged 30-50, hold traditional views and express concerns about the security of their bank accounts, fearing potential hacking. To address these issues, workshops and seminars may be conducted or partnerships with local NGOs focused on financial literacy may be done to provide essential knowledge to these traders and vendors. Additionally, as the major challenge identified was server downtime and network issues, ensuring robust internet facilities is crucial to overcoming this barrier.

C.8. Conclusion

The adoption of digital payments in Assam signifies a crucial step towards modernization and financial inclusion within the region. This transition, driven by technological advancements, supportive government policies and increasing public awareness, holds the potential to transform the state's economic landscape. Through this survey, valuable insights have been gained into the digital payment adoption among small traders and vendors in Assam. Remarkably, approximately 90% of them have embraced digital payments, with PhonePe being the most popular digital wallet, used by 70% of respondents. However, despite this widespread adoption, many vendors still hold traditional views and lack financial literacy. Addressing these issues through targeted education and improved internet infrastructure will be essential for fully realizing the benefits of digital payments in Assam.

 (Report Posted on 8 July 2024)