an analysis of digital payment behaviors of micro … · 2018-08-20 · merchant segments in focus...

www.cashlesscatalyst.org

MAPPING THE MERCHANTS MINDAN ANALYSIS OF DIGITAL PAYMENT

BEHAVIORS OF MICRO MERCHANTS


About CATALYST

IFMR LEAD, the initiative aims to expand digital payments and financial

• The initiative is funded by USAID under the mSTAR Program,

through funding provided to FHI 360. Housed within IFMR LEAD, the

initiative aims to expand digital payments and financial inclusion in

India.

• CATALYST identifies, develops and validates solution frameworks

and business models in collaboration with facilitating government

agencies and participating industry solution providers.

• CATALYST has launched a new business incubator, ‘Fintech for the

Last Mile,’ to promote entrepreneurs focused on developing

innovative digital finance solutions for traditionally underserved

segments.


About PRICE

• Established as an independent, not-for-profit, “fact tank’ and

“think tank’

• Engaged in building and disseminating seminal knowledge

(interconnected, consistent and up-to-date) about India’s Macro

Consumer Economy and Citizen’s Environment …. to enable

evidence led policy formulation, regulatory response and

business decisions.

• Focused on “How Indians earns, spends, saves, lives, thinks,

accesses public goods and amenities

• National network of primary data collection capabilities

• Have completed two Pan India Survey (2014 & 2016)

• Our collaborators and users: NITI Aayog, CEA, RBI, IIMs, CII,

LSE, MasterCard research Centre…) and business houses

(TATA Sons, M&M, TVS, WGC, Apple, Google, Airtel,

PepsiCo…, Bain)


1. Study background

2. Differences across merchants segments

3. Usage analysis of fixed store merchants

4. Strategies to promote digital payments

Agenda


Catalyst is working to help India’s small businesses and low-income

consumers increase usage of digital payments to access broader

financial services, and create opportunities vital to their future prosperity

1.Drive adoption and usage of

digital payments by small

merchants to extract more

business value, better transaction

experience, and reduce

inefficiencies

2.Expand access to tailored

financial services like savings,

credit and insurance to increase

capacity to weather financial

shocks and grow their businesses

3.Deepen economic

stability and social

transformation


Survey dynamics

• A comprehensive survey of merchants and consumers of Jaipur city

• That follows the best international practices

• Sample size

• Merchants: 2200+

• Consumers: 800

• Derived from listing exercise of 6000+ fixed store merchants and

12000+ households

• Covering 30 major market locations; 60 household clusters

• Targeting units earning INR 25000 and less per month

• Stratified random sample design

• Questionnaire based approach - Face-to-face interview

• Data collection: Android based application

• Survey period: August-September 2017


Merchant segments in focus

Fixed storen=1308 (1003)

Home based

businesses

n=495

Individual

service

providers

n=402

Street vendors

n=309

Merchants with customer facing business

establishments

Entrepreneurs that work from their homes to

earn a livelihood

Micro-entrepreneurs that sell specialized

services based on retainer or job-based fees

Merchants and vendors that either operate out

of a stall, from a street location, or are mobile


82% 71% 46% 46%

Hungry for growth

31% 27% 25% 20%

Better expectations in

the future

Business outlook

Fixed

store

Home

based

business

Individual

service

provider

Street

vendors


Education: 12th Std. and above 60% 13% 10% 6%

Age: 30 years and below 14% 18% 30% 24%

Registered businesses 84% 11% NA NA

Female ownership 1% 14% 4% 4%

Business contribution to HH income (median) 75% 50% 83% 100%

Monthly customer transactions (count, median) 320 200 NA 600

Average customer transaction size (Rs, median) 200 100 300 50

Repeat customer rate (median) 40% 70% 50% 20%

Annual turnover (Rs in lacs, median) 14 2.5 1.15 2.16

Profit margin (% of sales, median) 21% 20% 39% 44%

Demographic and economic context

Fixed

store

Home

based

business

Individual

service

provider

Street

vendors


Digital payment adoption and usage

42% 7% 4% 3%

Adoption rate

Top 3 reason for non adoption cited as:

Low customer demand 55% 33% 7% 20%

Lack of awareness 42% 78% 68% 66%

Fear of being cheated 42% 19% 21% 29%

High transaction cost 22% 4% 17% 11%

Lack of willingness to learn 29% 59% 22% 31%

No phone 14% 20% 22% 30%

Fixed

store

Home

based

business

Individual

service

provider

Street

vendors


Perceptions on business value from digital payments

50% 17% 6% 7%

Digital payments is beneficial

to business

Top most reason why

Attracts more customers 62% 49% 44% 48%

More sales from customers 41% 59% 24% 4%

Easier & faster to get paid 59% 59% 60% 48%

Sales & transaction records 43% 46% 64% 26%

Fixed

store

Home

based

business

Individual

service

provider

Street

vendors


50% 21% NA 11%

Suppliers accept digitally

49% 19% 22% 24%

Enables access to credit

59% 19% NA 17%

Target discounts to

customers

62% 18% 19% 23%

No upfront

installation / trial cost

Perceptions on potential value drivers

Fixed

store

Home

based

business

Individual

service

provider

Street

vendors

I will adopt a digital payment solution if…


1% 0% 0% 0%

Perceived theft and leakage

51% 15% 55% 45%

Perceived pain in collections

0% 0% 0% 0%

Concerned about access

to loose change

10% 7% 0% 0%

Perceived reconciliation

problems

Perceptions on cost of cash

Fixed

store

Home

based

business

Individual

service

provider

Street

vendors


Bank account ownership rate 97% 96% 94% 86%

Bank account usage rate 94% 18% 48% 56%

Phone ownership 94% 97% 87% 82%

Smartphone ownership 78% 28% 42% 28%

Access to data / internet 56% 27% 33% 19%

Usage of digital apps - social networking &

communication 71% 27% 34% 19%

Usage of digital apps - news & entertainment 50% 11% 9% 5%

Usage of digital apps - business productivity 20% 2% NA 5%

Financial and digital readiness

Fixed

store

Home

based

business

Individual

service

provider

Street

vendors

35%

Yes

23%

No

65%

No

77%

Yes

DIGITAL NON-USER

DIGITAL USER

Is digital payments beneficial to businesses?


Fixed Store Merchants: A large majority of adopters use mobile wallets

58%

Non-adopters

42%

Adopters

Breakdown by

payment type

UPI overall adoption

was at 2% and not

included here given its

nascency at the time

this survey was

conducted

Mobile

wallet

Internet

banking

Point of sale

52%8%

10%

7%15%

2%

6%


Fixed Store Merchants: Business profiles


99%

73%

38%

88%

Smart phone Access to internet

100%

Digital

user

Digital

non-user

Drivers for adoption and usage

Internet access appears to be a key differentiator between

users and non-users.

Fixed Store Merchants: Age, education and access to data influence usage

76% 65% 56%

24% 35% 44%

Merchant owner age profile

60 and

above years

31-59 years up to 30

years

82% 73% 50%

18% 27% 50%

Merchant owner education profile

Upto

secondary

schooling

Higher

secondary

and

technical

schooling

College

graduate &

above


DIG

ITA

L N

ON

-US

ER

DIG

ITA

L U

SE

RFixed Store Merchants: Preference for payment types across ticket sizes

Non-users seem to have a higher preference for cash across all transaction size.


Key ecosystem initiatives in CATALYST’s digital payments lab

Inclusive digital finance in

low-income slums

Goal: Drive active banking and digital finance in low

income residential, market cluster in Shastri Nagar,

Jaipur

Consumer to Government

payments (E-Mitra network)

Goal: Drive penetration of digital payment solutions (Aadhaar Pay)

among e-mitra customers by onboarding merchants and

rationalizing MDR charges

FMCG supply chain

Goal: Digitize supply chain payments in the FMCG sector

by providing sales incentives to retailers

Collection for subscription-

based vendors

Goal: Digitize customer collections for newspaper, tiffin, cable and

milk distributors using a digital invoicing applications

Dairy forward supply chain

(distributor to retailer)

Goal: Digitize payments from milk booth vendors to

distributors using appropriate payment solutions

CONSUMERS MERCHANTS DISTRIBUTORS

Wealth management for the poor

Goal: AI driven wealth management and digital

financial services to reduce income volatility

among poor communities in Jaipur

Hyperlocal digital financial services

Goal: Convert retail stores into financial supermarkets using Aadhaar

enabled services, digital payment acceptance, cash in - cash out, and

other business correspondent services

Pharmaceutical supply

chain

Goal: Digitize supply chain payments in the

pharmaceutical sector by providing sales incentives to

retailers

Goal: Deploy business models which link merchant access to credit to digital payment usage milestones

Credit as a hook


Actionable strategies to pursue

• Focus on specialised merchants that require remote collection needs

• Digitize supply chain payments

• Build digital financial capabilities

• Use GST as a hook

• Reduce trial costs / test new payment business models

• Introduce credit builder products linked to digital payment history

• Leverage regulatory sandbox to test frictionless digital payment use cases

an analysis of digital payment behaviors of micro … · 2018-08-20 · merchant segments in focus...

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