Most small businesses across every sector took a severe hit in 2020. But now a year later, embracing e-commerce and online payment methods has played a major role in keeping such enterprises afloat. Digital payment transactions are up by 76 per cent in Jan-Feb-March (JFM) of 2021, as compared to JFM, 2020, according to a report by fintech firm Razorpay.
“The last 12 months have been like being inside a time capsule,” said Vedanarayan 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 3-5 year horizon if not for the pandemic.”
The report, ‘The Era of Rising Fintech’, said that in JFM21, 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 a growth of 36 per cent in online transactions in JFM21 compared to JFM20, ranking above Uttar Pradesh, Madhya Pradesh and Haryana.
“A lot of first-time digital users and previously traditional, brick and mortar businesses have come forward to embrace digital payments,” said Vedantham. “Over 50 per cent of this digital adoption is coming from Tier 2 & 3 cities today, which indicates that this is not just an urban phenomenon.”
Payment options such as Buy Now Pay Later (BNPL) saw a whopping growth of 569 per cent in the last twelve months, owing to consumers avoiding bulk payments and preferring affordable payment modes. UPI (unified payments interface) continues to be the preferred payment option followed by debit cards, credit cards and net banking.
While the beginning of 2020 recorded just about 500 transactions in eNACH (electronic national automated clearing house) payments, a new payment service that allows anyone with a bank account to easily automate recurring payments. ENACH saw a growth of 23,962 per cent in JFM21 compared to JFM20, displaying a growing trend of businesses preferring digital and automated recurring payment processes.
Travel industry has truly made a comeback with a 52 per cent growth in JFM21 compared to JFM20. This is indicating some stability in the travel and hospitality economy, and also bringing respite to millions of people working in the sector.
In the last few months, consumers have increasingly been ordering online and with that F&B (food and beverage) industry witnessed the growth of 69 per cent from January to March 2021. Schools, colleges and online educational institutes have increasingly been accepting online payments for fees and salary payments; reflecting a 40 per cent growth in online transactions in JFM’21 vs JFM20
Real-estate saw an increase of 65 per cent in JFM21 vs (October-November-December) OND20, after a 14 per cent decline in the last six months of 2020 compared to the first 6 months. This is showing green shoots of recovery for the sector this year
Also, mutual funds were the preferred choice of investment for salaried professionals. The industry saw a 69 per cent growth in JFM21 vs OND20, signifying increased interest to save taxes before the FY year ended and live financially healthier lives.
The year 2020 brought in the digitisation of small businesses at a much larger scale than demonetisation. Having understood the many benefits of transacting online coupled with growing consumer preference, small businesses are expected to increase investment in digital technologies in 2021. Affordable payment options such as Buy Now Pay Later (BNPL) have seen an increased preference which is expected to rise and increase transactions for SMBs.
“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.”
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