Advantages of Payments India for Local Merchants

Advantages of Payments India for Local Merchants

Indian payment platforms offer multiple advantages to local merchants that can help them adapt to digital trends, improve operational efficiency and expand their customer base. The key benefits are analysed below:

1. Low cost and cost-effectiveness

  • low commission: Compared to traditional bank transfers or credit card transactions (fees of around 1.5%-3%), UPI (e.g. PhonePe, Google Pay) and native wallets (Paytm) typically have lower fees (0.5%-1%), and even some small transactions are free.
  • No POS inputs: There is no need to buy expensive card swiping equipment, you can collect payments via QR codes or virtual payment addresses.

2. Coverage of a wide range of user groups

  • The popularity of UPI: India's UPI has exceeded 10 billion transactions per month (2023 data), with penetration continuing to grow from urban to rural areas, and merchants can reach hundreds of millions of digital payment users.
  • Multi-payment support: In addition to UPI, it also supports e-wallets, Buy Now Pay Later (BNPL), RuPay cards, etc. to cater to different consumer preferences.

3. Convenience and instantaneous settlement

  • real time delivery (of funds): Collections via IMPS or UPI are almost instantaneous, improving cash flow; some platforms offer T+1 settlement cycles.
  • Simplified reconciliation: Automated transaction logging reduces manual reconciliation errors, integration to merchant app/back office management.

4. Policy and ecological support

  • Zero MDR policy: The government is waiving processing fees for UPI transactions for small traders (annual turnover < Rs 2 lakh), which directly reduces costs.
  • Digital India drives: Government incentives such as the "Digital India" and "Make in India" programmes encourage merchants to access digital payments.

5. Value-added services to enhance operational capacity

6. Value-added services to enhance operational capacity

The India Payments Platform not only provides basic payment collection functionality, but also helps merchants optimise their operations, increase sales and expand their business through a range of value-added services:

a) Embedded financial services

  • merchant banking: Platforms such as Paytm, BharatPe, etc. offer quick loans (e.g., BNPL or working capital loans) to small and medium-sized merchants based on transaction flow data at lower interest rates than traditional banks.
  • Insurance and Finance: Some platforms integrate insurance products (e.g. commodity insurance, health insurance) or high-yield deposit options to help merchants manage risk and idle funds.

b) Digital business tools

  • Intelligent Bill Management: Automatically generate tax returns (GST compliance), inventory tracking and customer analysis reports to reduce manual operations.
  • Online shop setup: Aggregated payment platforms such as PhonePe Switch allow micro and small merchants to create online shops for free and support social media lead generation (e.g. WhatsApp order matching).

c) Marketing and customer retention programmes

  • loyalty programme: Increase repurchase rates with cashback points, discount coupons and other features (e.g. Paytm's "Cashback" promotion).
  • targeted promotionAI recommendation systems based on consumption data that help merchants push offers to nearby users (e.g. Google Pay's "Nearby Offers").

7. Security and fraud protection upgrade

The Indian payments ecosystem has significantly strengthened its risk control measures in recent years to protect the interests of merchants:

  1. dual certification (2FA): MPIN or biometric verification required for all UPI transactions.
  2. Dynamic QR code anti-tampering : Prevents static codes from being replaced or forged.
  3. Real-time monitoring of alarms : Unusual transactions are automatically frozen and notified to the merchant.

8. Innovations adapted to localised scenarios

Solutions designed for the characteristics of the Indian market:

  • Offline Payment : Transactions can be completed even if the network is unstable (e.g. NPCI's UPI Lite).
  • Voice/dialect support : Vendors can confirm receipt of payment through the voice assistant.
  • Multi-level account management :: Chain shops can hierarchically view the water flowing through each outlet.

[Challenges and recommendations to address them]

Despite the advantages, local businesses need to be aware of the following.
1️⃣ digital divide → Choose an application with a simple interface (e.g. BHIM App).
2️⃣ Refund disputes → Clarify terms of use and retain electronic vouchers.
3️⃣ *Over-reliance on a single platform → Decentralised access to multiple payment methods reduces risk.

[Future trends]

With the advancement of the OCEN open credit agreement and the e-Rupee CBDC pilot, it is expected that more low-cost financing and cross-border trade settlement opportunities will be unleashed on MSMEs.

If you would like to discuss further industry-specific use cases (e.g. retail/restaurant), please feel free to add details! 🇮🇳💡