Since its introduction in August 2016, the Unified Payments Interface (UPI) has been a game changer for the digital payments ecosystem in India. The interface allows bank customers to make payments to another bank account on a real-time basis using the Immediate Payment Service (IMPS). The National Payments Corporation of India’s BHIM application, which is based on the UPI interface, was one of the first few UPI applications to gain traction among users. As part of its Digital Payments Lab in Jaipur, Catalyst piloted a merchant-centric UPI awareness and adoption campaign in a market cluster of nearly 400 retail outlets, Barkat Nagar, surrounded by a dense residential locality. The objective of the campaign was to enable merchants to accept payments via UPI-enabled applications at the point of sale, using Quick Response (QR) code stickers. It also endeavoured to test the suitability of the QR-based UPI solution for small merchants, and analyse the role of financial incentives and handholding models as an intervention to boost adoption and use by merchants and customers.

A follow-up survey was conducted four months after the campaign’s launch, to garner feedback from a sample of users as well as non-adopters.

This note discusses learnings and insights from Catalyst’s pilot UPI awareness and activation campaign, followed by insights from the feedback survey that was conducted in March 2018. It provides an analytical perspective on the features that work in favour of BHIM, and barriers to its wider adoption and use. From a use perspective, insights suggest that the BHIM application faces stiff competition from other UPI applications and payment platforms in the market. The authors make a case for reorienting BHIM as an ‘ecosystem enabler’ and propose two strategies to this end.

ENABLING SMALL MERCHANTS TO USE UPI

In October 2017, Catalyst implemented a pilot project to assess the suitability of UPI as a payment solution for small retail merchants and test the role of financial incentives in driving adoption and sustained use. The project tested the suitability of two UPI-enabled applications– NPCI’s BHIM UPI and Flipkart’s PhonePe.

Barkat Nagar in Jaipur was chosen for this survey because it is a major mixed-use market that is surrounded by a dense residential colony. It is frequented by a younger demographic that may be more amenable to digital payments adoption. Moreover, there is a fair penetration of prepaid digital wallets among merchants in the market which indicates a certain level of pre-existing digital payment awareness and familiarity.

The pilot campaign was conducted in partnership with NPCI and PhonePe and they provided the data for transactions on the respective platforms. It comprised of the following phases:

GENERATING AWARENESS AND IDENTIFYING LEADS

A 10-day awareness campaign to emphasize the benefits and ease of using QR-based digital payments was conducted in the market cluster using a combination of feet-on-street activities and kiosks that were set up in various locations inside the market, with support from the local market association. Learnings from a prior experiment conducted by Catalyst in the same market suggest that door-to-door marketing campaigns and kiosks across prominent locations in the market prove successful in garnering merchant interest. Moreover, proprietors of small retail businesses are typically strapped for time and manpower, and may find it challenging to step away from the store to participate in awareness campaigns. Drawing on this insight, multiple touch points were used to reach out to small merchants and consumers in the market and its vicinity, with the assumption that these activities would create awareness among a critical mass of people and spur two-sided network effects of payments.

Nearly 40,000 flyers were circulated in Barkat Nagar through newspapers, an additional 15,000 flyers were distributed through kiosks in the market, and 5,000 flyers were distributed by merchants to their customers. To improve the effectiveness of the awareness campaign, the information was packaged and delivered through collaterals in the local language. It consisted of information on steps to use the QR code to make payments, details about the incentive schemes for merchants and consumers (Table 1) and list of shops that would accept payments through the UPI QR code.

HANDHOLDING THROUGH ONBOARDING AND ASSISTED USE

ONGOING MONITORING OF USE, NUDGES AND AWARD OF INCENTIVES

FEEDBACK EXERCISE

BHIM AS AN AGGREGATOR OF FINANCIAL SERVICES

Presently, 92 banks are live on BHIM and it has recorded 58.16 million transactions in 2018. Further, the BHIM mobile application has been downloaded on 28.9 million devices, meaning that it contains data about consumer and merchant transactions. This data can be accessed by developers (in compliance with best practices to safeguard users’ data privacy), financial services providers and other Fintech companies for building “Over the Top” applications and complimentary products that may be offered within the BHIM app interface. Enabling secure access to data aggregated on BHIM can facilitate innovation by financial institutions, Fintech companies and other stakeholders who can utilise this information to develop customised financial service products.

This kind of integration, with BHIM acting as an aggregator for merchant-centric products, can play a role in bridging the credit gaps for the MSME segment. Another potential use-case is for the BHIM app to offer an insurance products marketplace and facilitate access to insurance products to merchants that operate these small businesses.

Under the extant regulatory framework, offering insurance aggregator services requires an entity to be licensed by the IRDA. Symmetrically, offering financial products like Mutual Funds requires the entity to retain a distributor license from SEBI. Since NPCI, the promoter and operator of BHIM, is a Section 8 Company incorporated with the objective to set up and implement retail payment systems in the country, the aforementioned proposal will require regulatory concessions from the relevant regulators

Given the socially beneficial impact of reorienting BHIM as an online marketplace for complimentary financial products, there is a compelling case for the NPCI to partner with the Ministry of Electronics and Information Technology and the Ministry of Finance to work with the concerned regulators to obtain these regulatory concessions. NPCI’s role as the umbrella retail payments organization in India and the fact that it is already a regulated entity under the Reserve Bank of India’s jurisdiction bolsters the case.

The potential illustrative workflow of such an offering is:

1. In addition to the ‘Send’, ‘Request’ and ‘Scan and Pay’ option, the application Home Page offers a section titled ‘Other Services’
2. Contained within ‘Other Services’ is a “catalog” that offers a host of financial products and services including credit, insurance (even potentially mutual funds).
3. Here the merchant can view, and compare, the products offered by banks, insurance companies and AMCs
4. The merchant can then click through to initiate the purchase of the product/service.

Policy related to small business credit could be amended to create high powered incentives for banks to originate credit from leads generated on the BHIM application. Though these high powered incentives could be delivered through several channels, we suggest a ranking system monitored by a government think-tank like Niti Aayog linked to the volume of credit that banks originate through the leads generated on BHIM.

MERCHANT SOLUTIONS ON BHIM

In addition to efforts to popularise BHIM among merchants using cashback schemes, providing value-added services such as a ‘khaata’ feature can enhance its utility to merchants. A ‘khaata’, colloquially, is a ledger kept by businesses to record sale and purchase transactions. With BHIM increasing the convenience in collecting payments for merchants, additional value can be unlocked by incorporating a dashboard for a ‘digital khaata’ in the platform. A “digital khaata” would record the business transactions paid through BHIM as “sales” and “purchase”. This would entail easy reconciliation and more efficient management of business operations. For instance, it may allow merchants to track supplier payments and send payment requests, and get paid seamlessly through the app. This khaata may also be used to undertake customer analytics for the merchants to generate insights on what could drive business for them. Illustratively, insights on sales trends can help the merchant design better sales strategies and map loyal customers. Conversely, purchase trends may yield data which aids the merchants in better inventory management.

BHIM can also be repurposed as a platform for business to business interaction. Illustratively, a merchant may design and market customised, time bound offerings for its clients via BHIM. Doing this would significantly expedite business communication and allow merchants to instantly accept and pay for such offers.

A potential target group for the testing of such a solution can be found in India’s vast network of small retail businesses. These businesses enjoy a regular local clientele from neighbouring residential and commercial areas and maintain physical registers. The analytics component of this digital khaata solution can help these small businesses design customer loyalty programs, and keep track of bills and payments due to distributors.

It is of importance to acknowledge that this solution may only be applicable to businesses which may not find it feasible to invest in ERP solutions to manage their business operations.

TOWARDS AN ECOSYSTEM APPROACH

Digital payments uptake by small merchants is a stepping stone to broaden financial inclusion. Integrating these small merchants into the digital payment eco-system is an imperative need and critical element to realise the vision of a cash-light economy.

Catalyst has established a Digital Payment Lab in Jaipur to formulate experiments, learn through an iterative process to institutionalize scalable and demonstrable templates for large-scale implementations. Catalyst organised a �Digital Payment Shivir� in one of Jaipur�s bustling market – Barkat Nagar, to handhold merchants into initiating a digital payment value-chain. The open-to-all camp is one of the first experiments of the Digital Payment Lab that endeavored towards educating, facilitating, onboarding small merchants and low-income consumers into the digital payment eco-system

The experiment kick started with a week of feet-on-street activities, shop-to-shop campaign to educate and understand merchant�s solution choice and culminated in a 3 day long camp (Shivir), at the main market area at Barkat Nagar.

One of the key objectives of the camp was to evaluate the most viable, suitable solution out of the varied options available for the fixed store merchant segments and importantly, to also analyze the intrinsic barriers to adoption. Catalyst�s formal agreement with the Government of Rajasthan and their formidable support significantly helped the efforts of this experiment in building strategic partnerships with Digital payment solution partners & banks such as EPaisa, FTCash and AxisBank.

The month-long merchant camp that kicked off in mid-March camp comprised of 4 key milestones, encompassing preparation, execution and post-camp learning activities.

Adoption, Solution Usage data and post-camp feedback from both the adopter and non-adopter merchants led to some actionable insights. These learnings were categorised under:

The last few months have been a watershed for the digital payments space in India. With concerted efforts from the government, as well as businesses, the landscape has seen some tectonic developments. From mobile wallets to lower cost, interoperable solutions such as UPI, Bharat QR code and Aadhar Pay, more tailor-made solutions to meet specific needs of small businesses and mass consumer segments are now seen on the horizon. Moreover, with the government announcing a budget of Rs. 495 crore to promote digital transactions using BHIM (a UPI enabled app), with a target to catalyze 25 billion digital transactions in the fiscal year ending March 2018, policy and market forces are colluding to promote a less cash economy. However, despite recent advancements, the consumption spends using digital means currently stand at a dismal 51%, making it crucial to investigate the reasons for low solution adoption.

For India to accelerate its progress towards a less cash economy, there is a clear need to deliberate on economic, social and behavioral dependencies that steer the decision of the low-income population to adopt digital transactions. In that context, Catalyst, an initiative to accelerate adoption of digital payments in India, has formed strategic partnerships with research organisations such as People Research on India’s Consumer Economy (PRICE), IFMR LEAD, CEGA and Ideas 42. Bringing in strong research expertise and rich insights to bear on Catalyst initiatives, these partnerships will play a substantive role in guiding Catalyst�s engagements with operational partners to design and implement a range of needs-based payment solutions for the �last mile”. They will help us get a deeper understanding on how merchants and consumers interact with financial tools, what are the barriers and what are the value propositions that induce them to transact digitally

Jaipur, Catalystaic first Digital Payment Lab

SMALL MERCHANTS, WITH A BIG ROLE IN INDIA’S DIGITAL PAYMENTS JOURNEY

At Catalyst, we believe that the shift from cash to digital, within local economies, is incumbent on transformation of 3 key stakeholders � suppliers, merchants and consumers. Each need to find adequate avenues and incentives for usage of digital payments, creating the need for an approach that focuses on enabling all three forces with requisite payment solutions.

Small merchants, currently with a digital payment penetration of only 6% of the total merchant base in India, serve as an important touchpoint for consumers as well as suppliers. They collectively have immense potential to accelerate the usage and adoption of digital payments. If merchants find transacting digitally beneficial to their businesses and are equipped with need based solutions, they will advocate the use of digital payments to a large consumer base, and also assert the message to suppliers. At the same time, there is a need for coordinated initiatives targeting consumers and suppliers directly, thereby integrating the entire value chain into a digital payment ecosystem

Recognising the central role of merchants in transforming a city into a less-cash economy, Catalyst�s first step towards understanding the current trends of digital payments in Jaipur was to interact closely with the small merchants of the city. In doing so, Catalyst partnered IFMR LEAD to conduct an observational survey of 30 markets in Jaipur, out of which 10 markets were selected based on criteria such as presence of low-middle income consumer base, overall size and merchant mix, and current digital payment system penetration. Further, in each market, a random sample covering 25% of the merchant base was surveyed to assess needs and capture merchants� perspective towards adopting and accepting digital payments from their consumers.

overall, jaipur boasts of high penetration of bank accounts within its merchant base.
however, in terms of active usage of bank account by merchants, and linkage of bank accounts with smartphones, the figures are comparatively low in most markets.

BACKGROUND

Ninety-three percent of India’s US$670 billion retail market continues to be unorganized, operating through mom-and-pop, kirana or standalone stores.1 According to a recent Boston Consulting GroupConfederation of Indian Industry (BCG-CII) report, this sector is projected to double from a US$1.1-1.2 trillion market by 2020, driven by a 70 percent rise in income levels and a 100 million addition in the number of youth entering the labor force.2 However, despite growth projections, there are several factors that hinder the growth of these informal enterprises which provide livelihood options to nearly 111 million workers,3 thus forming an important engine for India’s economic growth.

The lack of proper infrastructure and technical skills notwithstanding, a pressing factor hindering attainment of scale by informal enterprises is the lack of credit from formal sources at affordable rates of interest. According to an International Finance Corporation (IFC) report, the credit gap for informal enterprises within the Micro, Small and Medium Enterprises (MSME) sector in India was estimated at US$418 billion in 2012-13.4 Underlying the gap in accessing formal credit is the story of missing applicant credit histories or other parameters of credit worthiness used in traditional appraisal processes by lenders.5 Under such circumstances, most enterprises resort to informal lenders, despite the high interest rates charged. Reluctance to adopt digital payments further exacerbates this situation, since it is near impossible to convince lenders of credit worthiness in the face of missing information on credit and other transactional histories. Lack of awareness, low capability and unwillingness to try new technologies for fear of failure are some reasons that contribute to this wariness and create a vicious cycle that has been hard to break.

CATALYST, in its drive to explore the digital readiness of this segment, hypothesized that providing access to a small amount of credit at lower rates could act as a hook for digital payment adoption and usage, which in turn could trigger a positive spiral to access higher amounts of credit. In a preliminary study to understand the financial behavior and borrowing pattern of small businesses, CATALYST conducted a Credit Needs Assessment Survey (CNAS) where 1,140 small fixed store merchants in Jaipur were interviewed in September 2017. The survey showed that 69 percent of the merchants sourced their credit from informal sources such as friends, family and local moneylenders. Merchants expressed dissatisfaction with local moneylenders because they charged an interest rate of over 30 percent per month. But they still tend to prefer informal lenders over formal ones because of ease of access, no requirement of lengthy documentation, and speedy processes.

Armed with these insights, CATALYST launched the Credit as a Hook pilot in Jaipur in June 2018 for a select set of merchants. The pilot aimed to provide incremental loans through a starter-builder model starting with a small loan that would increase based on usage of digital payments, where the payment footprint would help merchants build their formal credit history. CATALYST hypothesized that, for the merchants, this would result in larger loans over a period of time at better rates of interest. For lenders, the presence of a digital footprint would provide the means to underwrite loans better and allow them to acquire new customers (i.e., a set of small merchants that was hitherto unserved by formal financial institutions). The initial pre-assessment survey carried out prior to the product launch, CATALYST’s CNAS report, revealed that 92 percent merchants contacted during the survey was aware of digital payment solutions. Of these, 53.5 percent was interested in availing credit through a digital platform with an expectation of quick processing time.

The first challenge that CATALYST faced was to convince lenders to provide an initial loan, albeit small, in the absence of a digital payment history. Traditionally, the route to access credit has been via an established digital payment footprint because of the inherent difference in the way payment and credit operates. Payment systems work better when more people use them, and therefore are designed to be more inclusive in nature. Credit, on the other hand, is designed to hedge excessive risks, and therefore is harder to establish as the first step to financial inclusion of the underserved market segment with no credit history.

A lending model is predicated on profits from taking calculated risks. So, lenders seek to build strong relationships with their customers and get a broad base of information to calculate the exact underlying risk. On the other hand, payment companies are inherently less dependent on understanding customer risk. Payment businesses therefore tend to be more transactional and less relationship-based than lending ones. The quality or depth of individual customer relationships matters less. Instead, the number and breadth of customers and their networks matter more.6

Understanding these basic functions of payments and credit is critical to exploring how the two can be linked. Technology and access to customer data play a huge role in leveraging the payment and credit lens to achieve financial inclusion.

The CATALYST pilot aimed at precisely this understanding. How can we urge merchants to start using digital solutions, which in turn can help them access credit at better terms?

While the merits of credit are known, research is beginning to show the advantages of digital credit as well. Early evidence from studying M-Shawri7 in Kenya has shown that uptake of digital loans has helped improve household resilience against shocks and increased the propensity of families to spend on welfare activities such as health and education.8 While we have little evidence available from similar experiments in India, we expect the positive benefits would be similar.

We hope that the following results of CATALYST’s Credit as a Hook pilot reveal the opportunities and challenges of launching a digital payment and loan product bundle for underserved informal sector merchants in India.

1. India’s $670 billion retail market is heading for a dream run, April 16, 2018, Quartz.
2. Retail Transformation: Changing Your Performance Trajectory, BCG-CII National Retail Summit Report, 2016.
3. Found: 111 million MSME workers in India as data rules changes, Livemint, November 22, 2017.
4. MSME Finance Gap, Assessment of the shortfalls and opportunities in financing micro, small and medium enterprises in emerging markets, IFC, 2017.
5. Research by Entrepreneurial Finance Lab, retrieved from The Hindu Business Line, ‘There is a credit gap of 56% in the MSME sector’, July 2, 2014
6. Buckley, R. and I.Mas. The coming of age of digital payment as a field of expertise, Journal of Law Technology and Policy, June 2016, Vol.2016.
7. M-Shwari is a paperless banking service offered through M-Pesa. M-Shwari bank accounts are opened and maintained through mobile phones.
8. Bharadwaj, P., W. Jack and T. Suri. Can Digital Loans Deliver: Take Up and Impact of Digital Loans in Kenya, 2018 (Working Paper, draft received on special request from T. Suri).

INSIGHTS FROM THE PILOT

Testing the hypothesis involved bringing together a payment provider and a lender — a role that was played by CATALYST. For the pilot, CATALYST partnered with Nupay, a Point of Sale (PoS) device or card swipe machine provider and an early stage startup, and Capital First, a Non Banking Financial Company (NBFC), which agreed to provide term loans to fixed store merchants in Jaipur. The combination of a payment device and loan was offered as a bundle, with the intention of testing the extent to which credit can act as a ‘hook’ to adopt and use digital payments. This combination was created for the purpose of the pilot alone since lenders are unclear of the risks involved in offering a small amount of credit, no matter how small, before they can establish credit history based on transactions on the device provided. Since the combination of partners was arranged by CATALYST for the pilot, CATALYST also had to provide a set of Feet on Street (FoS) for on-the-ground support to roll out the services. The FoS team, trained by CATALYST, provided support in marketing and customer acquisition.

Product bundle: Capital First and Nupay, a term loan with a card swipe machine

Product bundle details: Capital First (the lender) agreed to provide loans of a ticket size of INR 25,000 to INR 5 lakh at an interest rate of 18 percent to 24 percent annually for a tenure of nine months to 36 months, depending on the ticket size and repayment capacity.

Nupay’s card swipe machine had a monthly rental of INR 350 (~ US$5) plus 18 percent Goods and Service Tax (GST), which was also to be paid by merchants. The lender agreed that merchants would be considered for an incremental loan based on their repayment history observed in the first tranche of the loan, and their digital transaction footprint.

Project roll-out and findings: digital payment adoption vs. non-adoption

During the pilot, CATALYST reached out to 409 fixed store merchants across six major markets in Jaipur (Shastri Nagar, Sodala, Durgapura, Khatirpura, Jhotwara and Bani Park).⁹ These stores have been in business for an average of 10 years and had a median monthly revenue of INR 45,000. Most stores (99 percent) were owned by men; 87 percent was sole proprietorships while a smaller group (13 percent) was managed jointly with other family members. Sixty-five of them were already using a PoS or a card swipe machine and the remaining 344 merchants were given a demo on using a new PoS machine with the help of CATALYST’s FoS team.

This data set is separate from the earlier CNAS data. With a time lag of eight months, it is often difficult to work with earlier data sets. So, 490 new fixed stores were chosen from six new markets in Jaipur

Key results from the experiment were:

• There were eight fixed store merchants who had never used a card swipe machine but eventually adopted digital payment solutions after being trained on card swipe usage by the CATALYST FoS team.
• The primary reason for adoption was that it would allow them to service a broader customer segment that used (debit/credit) cards to make payments. In other words, the ability to serve a specific customer segment that was familiar with digital solutions was a key driver. This would also result in new customer acquisition over a period of time.
• Among the merchants who refused to use or adopt a PoS machine, the dominant reason for nonadoption was the absence of customer demand (62 percent, Figure 1). These merchants were unwilling to act as enablers to train customers in using a new digital solution. If the customers asked for the service, they were happy to provide it.
• The remaining 10 percent (Figure 1) reported the inherent cash stickiness of their business as a major deterrent. Another 2 percent (Figure 1) cited the cost of the machine as a major barrier to accepting digital payments.

Praveen Agarwal, a 35-year-old merchant, lives and works in the Sodala neighborhood of Jaipur. Together with his brother, he runs a retail shop that sells bags. Neither uses Paytm, Unified Payments Interface (UPI), PhonePe, Bharat Interface for Money (BHIM) or other popular means of digital payments. Praveen tells us that he had installed Paytm about a year ago on his phone but never had the urge to use it. However, after running a shop for ten years, he invested in a mobile point of sale (mPoS) machine to lure new customers.

WHAT’S THE HOOK TO ADOPT DIGITAL PAYMENT SOLUTIONS?

Intrigued by this change in behavior, we asked him about the real triggers behind this decision. Praveen says that he had been running a small shop next to his current shop till three months ago. He and his brother used a large part of their savings to move into a bigger shop on the main road. Now, the shop is noticeable in terms of both its size and location.

Praveen says, “Earlier only one or two customers would want to make payments through a credit or debit card. Today, with this bigger shop, we see about six or seven such customers daily. We don’t want to lose these customers. Each customer is valuable for our business.”

There is no ATM within a one kilometer radius of the shop. Praveen adds, “At times, customers would leave the shop to withdraw money from the closest ATM, and change their minds in the process. At times they would never return. I do not want to lose those customers or let them change their minds. I think a PoS machine is going to help me hook those customers.”

CATALYST’S ENGAGEMENT

CATALYST has been experimenting with various ‘value additions’ to the PoS/mPoS mechanism to discover a perfect hook for digital payments adoption and access to credit. Field stories such as this tell us that newly opened shops with a larger ambition and bigger appetite for growth can be good use cases for early adoption. However, for shops that have not been able to grow in size over time or where the cost of digital adoption is still high, we need to experiment further to learn, through an iterative process, about value-added services that can lead to faster adoption.

The narrow streets on our way to Amna’s house are full of life in the disorganized neighbourhood of Bandha Basti, a hilly slum cluster in peri-urban Jaipur. Amna, a resident Anganvadi worker, has been working since 4 years with a monthly income of Rs. 2000 providing for the six family members with support of her husband.

PREFERENCE FOR PAPER RECEIPTS OVER SMS CONFIRMATION AND BIGGER MPOS MACHINES

Vaibhav Singh is one such kirana store owner in Sanganeer in Jaipur. He has been using a PoS machine for the last three years; he’s keen to know about and use the new mPoS machine as a new mode for payment. However, his concerns on adopting an mPoS machine are whether he can get:

1. Printed receipts for each transaction; and
2. A bigger PoS machine at the same cost as the old one because a larger machine provides better visibility and does not easily ‘get lost

THE WAY FORWARD

However, what remains to be seen is whether the mPoS companies’ recent decision to do away with monthly rentals (lifetime rental free payment) with only one time installation charges (of approximately Rs1700) has a large enough impact for merchants to overcome their current concerns on paper receipts as well as machine size. If it does, even gradually, it will be a big step towards building digital trust among merchants across several age groups and levels of digital exposure.

Sporting white long hair, Rajesh Jain, has seen many ups and downs in his life, and is now an eMitra merchant in Jaipur with a beeline of customers at his provisions shop. The shop now functions primarily as an outlet for extending government services, ranging from utility bill payments to university fee payments.

“I used to be a large-scale trader with stakes in wholesale and distribution but things started to go wrong and we suffered a massive loss in business. Then I started a small shop to get back my financial stability, but what has transformed things for me is taking on the eMitra work,” Jain said, taking breaks between a steady stream of customers as it middle of the month when most of them pay the utility bills.

DIGITAL PAYMENTS BROUGHT MY BUSINESS BACK TO LIFE

His youngest son supports him on the days that see a rush of customers. Like most small shops, Jain’s shop, is an extension of the house and is the main source of livelihood for the family of five.

“I started offering eMitra services around five years back primarily due to public demand and lack of e-Mitras nearby and have been blessed with a good footfall since I started. Digitization in the country has created a big shift, but it will take time for customers to become confident about using digital payments on a daily basis,” Jain added.

eMITRAS – THE CHANGE AGENTS

For 30-year-old Satya Prakash Bansal, the transition from running a sound shop as he calls it, to an eMitra merchant, providing numerous digital services has been exciting. He is among the thousands of entrepreneurs offering services to citizens across Rajasthan through a government digital platform that provides 300 plus services.

When we met Prakash, he was busy shuffling through hundreds of chits and receipts in his small shop located in the market residential area of Barkat Nagar. But soon the reason for this became apparent.

It was that time of the month when residents throng to his shop for payments of utility bills, such as electricity and water, among several others.

CASH IS STILL KING, BUT DIGITAL IS ON THE RISE

“The payments are still largely in cash. But many people have started making payments through debit card (he calls it ATM card, just like most people here) and it is on the rise. It stands at around 10 percent presently,” he says.

Prakash was also very emphatic about the need for making customers aware of the safety and advantages of using digital payment methods. He himself has been nudging them but the progress is slow.

“Most of my customers are retired and old people who like to pay by cash. I try my best to educate and explain… but it is tough,” he added.

“Of course, a lot of customers are starting to pay as they become more confident. It will continue to grow with time, but it is hard work,” he emphasizes.

Among some of the challenges he faces in accepting digital transactions are the transaction failures.

“There were some payments that did not go through successfully and took time to be reversed. This was difficult to handle because the customers kept coming back to me for answers. But now people use debit cards and they are more aware. I don’t need to tell each and every customer to use his debit card now,” he adds.

ON A GROWTH TRAJECTORY WITH DIGITAL

“I started doing eMitra work about four years back and the business has grown tremendously since then,” Prakash says. This is one of the many small shops in the large market-residential area, and like others who decided to ride the opportunity of providing digital services and educate customers, he too is reaping the fruits of a growth in the business.

“I will continue to expand my business through my work as an eMitra and promote digital transactions because cash is difficult to manage and involves risks,” he explains.

His mother runs a small grocery shop next door. He goes on, “Digital transactions will not only reduce my bank visits to deposit cash, but also help me to keep my wallet balance easily.”

The business of renting out sound equipment for weddings and social functions is now an aside for Prakash as his eyes are fixed on servicing and educating his customers.

Dressed in a striking red sweater, Vikas Parnami, is thoughtful and articulate as he manages a steady stream of customers at his small shop that also functions as an eMitra outlet, through which he provides access to government services and accepts payment of utility bills.

“It’s been three years since I started offering eMitra services and have seen a steady growth of customers ever since,” he says, before turning his attention to an elderly customer who just discovered that he cannot make digital payments because because he does not own a debit card.

The 40-year-old is part of a 55,000 strong merchant network in Rajasthan that constitute’s the nucleus of the state-run eMitra platform, which offers more than to 300 services

AWARENESS AND NUDGING

“We tell the customers who come for eMitra services to try digital payment methods, especially debit cards, but the most frequent and immediate response is one of apprehension and distrust,” he adds.

Vikas’ shop is his own initiative and stores various provisions and goods for daily use. It is a general store, to use the term popular for describing small shops that cater to the neighborhood.

“Most of the transactions are through cash. Although there has been a slight growth in digital payments for eMitra services in the past few months, it is still low,” says Vikas. “I hope it picks up fast,” he adds, smiling.

“The customers need awareness and incentives to move from the cash habit, and we are doing what we can,” he says while rattling out a list of ideas for awareness materials that can be used.

“We could use illustrations, factsheets and WhatsApp messages,” he said with palpable energy in his voice.

DIGITAL MAKES BUSINESS SENSE

So why is Vikas so keen on nudging his customers and challenging what he calls a ‘business as usual approach’, especially among the older age group?

In 2013, Vikas jumped onboard the bandwagon of digital services through a state-level variant called Common Service Centres (CSCs). His shop had few takers in an already crowded and competitive market of neighborhood shops, but the entrepreneurial opportunity changed his business around and set Vikas on a mission to excel in providing paid e-services and establishing a strong bond of trust with them.

“I had barely ten customers for the eMitra services when I started, but slowly my clientele started to grow. I am making money now and the shop is also doing much better. The two businesses complement each other,” he added.

“Customers need to know that going digital is good for merchants as it frees us from the risks of handling cash. It also does away with merchants having to take multiple trips to the bank. For customers, it eliminates the need to have to go to the ATM each day to get cash” he explained as his father joined him in the shop.

“Currently, the ratio of payments is 70 percent in cash and 30 percent through cheques and digital. It needs to change to the exact opposite of that,” he says.

In the two-hour long conversation, we saw just two customers coming in to buy daily items, but there were easily over a dozen to pay bills or enquire about services.

Dressed in spotless white like most men of the region, Ghansham Singh is at ease waiting for his turn at the counter of a small shop. With just two other people around the counter, he awaits his turn as they speak with the bespectacled middle-aged shopkeeper.

The shop has large audio speakers and woofers stacked up to its roof. The display is hardly something that a 70-year-old would be interested in, but on a closer look one gets a hint of what is drawing people, holding paper slips in all colors.

The small shop functions as an ‘eMitra’ outlet which provides citizen services ranging from bill payments to college admission applications. The shop owner, Satya Prakash Bansal, is an eMitra merchant and caters to the neighborhood in the Barkat Nagar locality of Jaipur. The 30-year-old is part of a 55,000-strong merchant network in Rajasthan, which constitutes the nucleus of the staterun eMitra platform that offers close to 300 services.

To learn more about the network, how it functions and the work Catalyst is doing to digitize payments, please read this blog.

DEBIT CARDS DOMINATE DIGITAL PAYMENTS

Although Singh retired for over two decades ago, he has been aware of debit cards for a while now, even though, like most elderly customers we met, he calls it an ATM card. While most customers his age who visit these eMitra centres use only cash for payments, Singh has been an early user and proponent of digital payment systems.

“I have never had a problem and making digital payments at an eMitra is very convenient,” Singh says, in response to a question on what he thinks about digital payments and whether he has had any difficulty using them. When asked about other digital payment methods, he insists on his choice of debit card payments.

To him, debit cards are the way to go. He uses his debit card mostly for bills, high value payments and shopping transactions. “If the payments are up above Rs. 3,000, I use my debit card, but for smaller payments cash is better for me,” Singh says.

“I pay electricity bills every two months and water or telephone bill every month,” Singh adds, resting outside the eMitra merchant shop. Elderly family members constitute the biggest chunk of consumers who frequent the eMitra outlets to pay utility bills, according to Bansal.

UTILITY BILL PAYMENT TOPS THE LIST

He adds, “However, customers of this age group, even those who may be digitally savvy, are not as comfortable with credit cards and e-wallets as they are with bank accounts with debit/ ATM cards.”

“I have had no problems understanding or using debit cards for payments. Even in my age group, there is no one I know who has said anything negative about digital payments,” Singh says when asked if people in older age groups found adoption of digital payments difficult.

AGE ISN’T A BARRIER TO ADOPTION

In terms of household usage, he said that everyone in his family is fairly evenly placed in terms of digital transaction knowledge. One senses a feeling of pride in Singh’s assertion, when he says: “I can manage digital payments by myself and am confident doing transactions.”

As we walked around the market over three days, the presence of elderly customers was striking.

We noticed that very few used debit cards and that cash continues to be the most preferred method of payment – a fact confirmed by the eMitra merchants.

However, the e-Mitra merchants also pointed out that the same people would be much happier receiving payments digitally because it would save them the hassle of handling cash and blocking money by maintaining pre-loaded cash in an e-wallet.

SAFETY AND CONVENIENCE

“These days, you never know what can happen in crowded places. Your cash can be stolen or simply snatched. Therefore, using digital payments or a debit card is a safer option,” Singh said about the distinct advantage of paying eMitra merchants digitally.

Singh also mentioned that to him personally, digital payments was his preferred method. He, however, reiterated that Rs. 3,000 and above was his threshold for using a debit card or ATM card.