The Government of India launched its most ambitious program called Digital India to transform India. The program had plans to connect rural India with high-speed internet and online infrastructure. The program saw about 624 million Indian internet users in the year 2021. The digital transformation required changing the payment gateway of the country to enhance the effectiveness of the program. The National Payments Corporation of India (NPCI) developed a real-time payment system called the Unified Payments Interface (UPI).
The COVID-19 pandemic gave a push to small businesses towards digital transformation. Small businesses had various difficulties in adapting to the changes. They were required to accept digital payments from their customers to ensure contactless transactions. Digital payments have seen an enormous rise, with UPI being the biggest, compared to other online payment systems in India. In the article below, we will be discussing the advantages that are posed by UPI payments for small business owners.
What is Unified Payment Interface (UPI)?
Unified Payment Interface (UPI) is a real-time payment system used for quick and easy fund transfer. The transfer assists interbank peer-to-peer transactions and person-merchant transactions. UPI payment is an immediate fund transfer that is much faster than NEFT and is available 24/7 to enhance user experience. It is the largest retail payment system in India that has the highest volume of transactions. Many small-scale businesses that have become UPI-enabled have widespread reach in terms of sales as well as customers.
7 Advantages of UPI Payments
The UPI payment has benefited businesses and customers by providing them with a transparent and contactless paying experience. As per reports, December 2021 saw UPI transactions worth Rs.8.27 trillion. Though there are many sections of beneficiaries in UPI transactions, let us now look at the advantages of UPI payment for small businesses and merchants.
- Convenient for Small Transactions: In a middle-income country like India, small businesses are considered the backbone of the economy. Street vendors comprise the major part of small businesses in the country. Since the volume of transactions is often smaller in small businesses, a convenient and cost-effective payment method was always the ideal requirement for an overall digital transformation. UPI Paymenthas helped them carry out low-cost transactions with no transaction fee. Other payment merchants, such as Visa and MasterCard, charge 1-2% as transaction fees from the businesses.
- Easy to Use: India is a country with low financial and digital literacy where many people still have difficulties accessing payment methods on a day-to-day basis. With such drawbacks, it was considered a highly impossible task to digitally transform small businesses. COVID lockdowns presented a necessity and opportunity to both customers and merchants for using digital payments. Many businesses just had to display a QR code through which payment was made within seconds using UPI. Zaakpay, a popular payment gateway, allows its customers to pay with any UPI payment app. It is extremely easy to use and is designed to process all kinds of transactions. With Zaakpay, you can assure secure payments within seconds.
- Efficiency: Though several digital wallets support instant payments, users have to transfer money into the wallets for using them. This made customers lose interest in their respective banks as the process was cumbersome for some people. On the other hand, UPI helped resolve this issue since the money used for payments would be deducted directly from the user’s bank accounts. UPI benefitted customers by ensuring interest from their banks.
- High Versatility: UPI allows businesses to access many accounts from a single place. It further helps to eliminate the use of multiple apps for each bank since UPI links all their bank accounts. The money is transferred to the account which the owner has specified as the default for receiving the money. UPI payment is the leader amongst other payment gateways since it allows payments from various platforms such as Swiggy, BigBasket, Amazon, and IRCTC. It is a highly accepted method of payment due to its versatility.
- Secure payment: Online payment usually poses concern over the safety and security of online transactions. Small businesses neither have the knowledge nor the infrastructure to secure their customers’ online transactions efficiently. It allows transferring funds from multiple bank accounts without revealing the senders’ bank details. UPI is considered one of the most secure payment modes that have many security features. The single-click two-factor authentication has increased the level of security and safety of UPI transactions. Payment gateways like Zaakpay allow UPI transactions that are PCI DSS complaints to tighten the security of online payments.
- Faster Settlements: Small businesses rely on daily earnings to maintain their cashflow. A delay in settlements will reduce their cashflow that may result in compromising their business operations. UPI helps them resolve this problem by offering a real-time settlement for the payments received from the customers. It ensures efficient operations of businesses thereby, providing a valuable service to their customers.
- Cashless Society: UPI payment is a significant driver in making India a cashless society. Though there were many measures taken by the Indian Government to become a cashless society, nothing has been more successful than UPI. Allowing digital payments by small businesses has shifted the focus of payment industries to digital payments. UPI comprised 60% of total payments by volume, and 47% of all payments will be made through UPI.
Small Businesses play a vital role in India that contributes to long-term economic growth and development. They focus mainly on rural and semi-rural areas, allowing them to contribute to the economy. Small businesses can take benefit of the many advantages of cashless transactions and digital payments. UPI payment method has a lot to offer to small businesses and customers by making transactions easier. COVID-19 pandemic has given a surge to the online payment industry that has poised the growth of UPI transactions. The increasing trend of digital payments and online shopping has opened up several new paths towards digitalization. The online payment industry in India is slated to touch $1 trillion by 2026. With the right strategy and implementation by the government, the payment industry can have enormous growth that can help India become a completely digital economy.