Technology for MSMEs: The Micro, Small, and Medium Enterprise (MSME) sector is thought of the backbone of the Indian Economy. It is really essential for the development of the economy as it not only contributes drastically to our economy but also personnel a precious chunk of the population. The Union Minister of MSME, Nitin Gadkari had stated that the MSME sector contributes almost 30 per cent to Gross Domestic Product (GDP) and export from it is 48 per cent. It comes as no surprise that the current events namely the implementation of GST and demonetisation had a considerable influence on this sector. The implementation of GST unified close to 17 taxes into one particular, thereby simplifying the complete taxation procedure and streamlining this unorganised sector. It has enabled MSMEs to channelize their sources more productively. Similarly, demonetisation brought quite a few MSMEs beneath the umbrella of digital India and lowered the sole reliance on private finance alternatives to seek credit. Many Banks and Fintech platforms are now providing digital banking and payment options that have empowered MSMEs by creating their processes more transparent and effective.
Covid-19 pandemic which has had an unprecedented influence on economies, globally, has largely improved the adoption of digital payments amongst MSMEs in India. Due to the Government’s push and consumer’s apprehension towards the usage of money, digital modes gained momentum. With digital payments, these organisations have been capable to make certain timely payments, optimisation of sources, and streamlining of operations. The ‘Indian MSME Impact Report, 2019’ by Instamojo stated that 20 per cent of MSMEs saw worth from buyer preference for digital payment technologies, information safety, and synchronization. Despite the encouraging initiatives and an improve in digital adoption, MSMEs are but to realise their complete prospective. There are numerous challenges that persist and require to be overcome by the MSMEs:
Digital Awareness
For a new trend to encompass any sector, it is crucial that the stakeholders are totally conscious of its positive aspects. The government and regulatory bodies such as RBI & NPCI have produced excellent strides in providing digital positive aspects to MSMEs. However, quite a few MSMEs have not digitised as they lack sources and the correct options or incentives and are not totally conscious of the worth such options provide. To address this, quite a few banks and payment players are taking initiative to educate merchants. However, to bring about the subsequent wave of development in MSMEs, these efforts require to percolate deeper into Indian geographies, specifically in Tier-III and IV markets.
EMI and Digital Credit
To bring more merchants beneath the umbrella for digital India, monetary help is of paramount significance specifically for MSMEs. There are quite a few merchants who want to go digital, but the lack of infrastructure prevents them. Also, there is a perceived higher expense to digitisation which tends to make them apprehensive to make the switch from physical to digital or even ‘phygital’. To tackle this, it is essential to have policies that give monetary help to merchants with uncomplicated repayment alternatives. Recently, a nicely-identified digital wallet player announced that it will give collateral-absolutely free loans of up to Rs 5,00,000 at a low-interest price to MSMEs. Also, attributes like the spend-per-use model can additional encourage tiny Kirana retailer owners to adopt digitalisation.
Strong, protected, and safe infrastructure
It goes with out saying that for escalating digital transactions, there ought to be a powerful and robust infrastructure that can help the processing of seamless transactions with out compromising on information safety. Recently, there have been frequent digital outages with top banks and payment providers. In November, Peer-to-merchant (P2M) transactions contributed to 40 per cent of the all round transactions of about 885.55 million transactions. Such a stupendous surge demands a powerful infrastructure to help it and create self-confidence amongst smaller sized merchants. Data breach incidents and payment frauds make a powerful sense of urgency for banks to make certain that the Maximum Tolerable Period of Disruption (MTPD) is not exceeded.
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The lockdown has produced quite a few MSMEs go digital and therefore any loophole in the ecosystem will make them susceptible to attacks. According to Kaspersky, 48 per cent of tiny companies witnessed information breaches in 2019. Additionally, in its cybersecurity predictions for India, Kaspersky stated that with the developing digital economy cyber frauds are most likely to continue in 2021 as nicely. Another report points out that 60 per cent of all cyber-attacks are aimed at MSMEs, and of these providers, 60 per cent under no circumstances recover from it. Such incidents make a sense of panic amongst companies and it becomes crucial to come up with options that reinstate their self-confidence in making use of digital payments.
In addition to fraud prevention, it is equally essential to invest in cyber defense options. Banks, payments networks, and fintech players are ramping up their platforms to give a safer and more safe expertise to their customers. Such positive aspects require to be communicated to the MSMEs across sectors as a component of bundled options.
Value-added services
One of the quite a few strategies of enhancing digital penetration is providing worth-added services. With smartphones and the advent of payment platforms like BHIM UPI and QR, more consumers are opting for digital payments, giving MSMEs a excellent chance to improve their small business avenues by the indicates of worth-added services. Looking at the present situation, consumers favor retailers who give further services along with digital payments. Hence, options such as loyalty applications, uncomplicated EMI facilities, billing payments, and so on, should really be extended to merchants as it can enable expand their small business horizons specifically in difficult instances like these and make a powerful sense of brand loyalty. For instance, merchants with Ongo POS terminals can now pick out to give immediate motor insurance coverage to their buyer base in addition to providing other utility attributes.
It is equally essential to create a sense of self-confidence amongst merchants and buyers, in digital transactions taking spot at an outlet. For the very same, any exception in transactions should really be handled swiftly and transparently. Value-added services such as Paytrack can enable merchants confirm an complete cycle of transactions on the PoS terminal or on the app. Here, the merchant can confirm a transaction status on the portal/app in addition to the PoS terminal and view any dispute logged in by the buyer. Such options go a extended way in constructing a sense of trust and credibility amongst each – consumers and merchants.
Co-branded initiatives
Once a merchant is educated and brought beneath the ambit of digitalisation, it is crucial that communication is also sent to its buyer. While word of mouth continues to be the indicates of communication for tiny or medium-sized merchants, numerous Banks & payment players ought to work in tandem with their merchants to advantage the all round ecosystem. For instance, American Express’ ongoing ‘Shop small’ campaign is an initiative that aims to improve footfall at shops impacted by the Pandemic. Amex with its companion payment providers like Ongo, is providing profitable cashback to current Amex customers which in turn positive aspects the merchants. Such initiatives will go a extended way in encouraging merchants to opt for digital alternatives and enable them improve footfall.
In conclusion, for monetary inclusion to be accomplished, it is essential that MSMEs are not left behind in the race for ‘digitisation’. There are initiatives and policies in spot that can advantage the tiny & medium-sized merchants, but to make certain that the complete ecosystem positive aspects from it, just about every stakeholder – whether or not a bank or a payment player, ought to play its function.
Ravi B. Goyal is Chairman & MD of AGS Transact Technologies Ltd. Views expressed are the author’s personal.