How Are Digital Payment Solutions Transforming Smaller Retailers?

How Are Digital Payment Solutions Transforming Smaller Retailers?

The global digital payments market is expected to touch $7,640 billion by 2024, with a CAGR of 13.7%. This is staggering by all accounts and is the signpost of the future. From the time traders relied on the barter system to the present digital payments ecosystem, the whole transaction economy has undergone massive changes, with technology driving the change in the last leg of the transformation.

In India, the change is visible on the ground with many initiatives bringing convenience to users and traders alike. From Unstructured Supplementary Service Data, UPI, Mobile Wallets to Cards, Digital Transactions have transformed the landscape. Transactions involve two entities, and it is necessary to look at the benefits from the perspective of both.

Check out lines and the patron experience

The speed with which transactions are concluded are part of the customer buying experience and contribute to satisfaction levels. Shoppers are more interested to spend time browsing through products, rather than waiting at a checkout line. Shoppers often show frustration when made to wait in long checkout lines.

With digital payments, NFC (Near Field Communication) technology, mobile wallets and QR codes, retailers are now getting customers to quickly conclude transactions. This facilitates and encourages customers to spend more time checking for products, apart from improving customer satisfaction levels. Long checkout lines tend to discourage customers from returning to the store, and digital payments help to arrest this churn.

Freedom from counterfeit notes and physical safety for retailers

In India, a study revealed that counterfeit currency to the extent of INR 400 crores was in circulation.  In the US, the figure is estimated to be around $70 million. Globally, counterfeit currencies plague economies, but often the worst hit is the small retailers. Large retailers and businesses that involve high-value transactions rely on machines to check for fake notes.

However, smaller retailers deal in small denominations and the number of transactions is often very high at any given point of time and it is virtually impossible for retailers to check every note during purchase. Similarly, small retailers are exposed to the risk of theft, robbery, and violent burglary as cash accumulates in counters at the end of the day.

In convenience stores in the UK, an estimated loss of 193 million pounds sterling is attributed to crime.  The story is the same globally. Digital payments have helped retailers achieve better loss prevention methods. With lesser cash transactions it is possible to actually pay more attention to check for fake currencies, while the risk of robbery and burglary stands virtually eliminated.

Simplified, transparent bookkeeping

Bookkeeping is essential for the growth of retailers. The ability to track sales, expenses and inventory is key to the success of a retailer. In a data-driven world, it is not just the large enterprises and market chains that need business intelligence and inputs, it is also the small retailers who need inputs. Small retailers often have to compete against the big established names with deep pockets, and it is absolutely essential to have a complete view of the sales and inventories.

With digital payments, it is possible to easily integrate bookkeeping activities with transaction data. This makes it possible for retailers to quickly track sales performance and various metrics, without the need for spending considerable time.

Expand business to cater to a broader segment of shoppers

Small retailers earlier tended to avoid getting on digital payments platform as a result of the transaction fee involved. Consequently, smaller retailers ended up catering to a smaller segment of shoppers. Shoppers who relied on digital payments avoided smaller retailers due to this inability to pay digitally. With the digital payments landscape opening up, with multiple options and lesser transaction fees, retailers have joined the bandwagon and as a result, are catering to a broader segment of shoppers. The cost and benefit ratio of digital transactions have convinced retailers into opting for a better choice. The reasonable transaction fees charged by most service providers have made the option more attractive.

Helps small retailers offer value-added ‘home delivery options’

While small retailers may not get onboard marketplaces to sell products online, the options of retailers offering value addition through home delivery cannot be ruled out. The effort among retailers is to stay competitive and offer services/products that help to expand the customer base and sales. Home delivery of products offers convenience to shoppers and a sizable majority of retailers are now offering home delivery options. Customers choose to make payments through one of many options, and digital payments are among preferred options. The absence of digital payment option often sends customers to service providers who accept digital payments.

Transaction fees on cash withdrawals push buyers to prefer digital payment options

Most banks have a cap on the number of free transactions for cash withdrawals. Consequently, account holders try to avoid making more numbers of cash withdrawals than necessary. Shoppers generally tend to keep required amounts of cash, preferring to let the balance remain in their accounts. This automatically makes digital payments the preferred choice among a large number of buyers. Retailers who accept digital payments end up as preferred retailers and those who offer superior quality products with convenient payment options are known to experience better sales opportunities and growth prospects.

With increased scrutiny on cash transactions, retailers and shoppers alike are now embracing digital payment options. The benefits of digital payments for both entities to a transaction have made it popular and convenient. This encourages retailers to shift to digital transactions.

The advantages of digital payments override the marginal costs towards these platforms and help businesses retain the competitive edge. It is now becoming more of an imperative and lesser choice. Small retailers are now recognizing the need to not be an outlier, but to be a participant in the new ecosystem to benefit from the advantages and stay competitive. Digital payments are the future of transactions and it is only a question of time before it becomes the new standard.

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