New Delhi: The unorganized retail sector still has huge untapped opportunity for adoption of digital payments, said a research report.

The report based on the usage pattern of digital payments conducted by the Centre for Digital Financial Inclusion(CDFI), Institute for Financial Management and Research in collaboration with researchers at Digital Innovation Lab, IIM Bangalore, found that around 63% of the retailers are willing to use digital payments such as mobile payments and card payments.

Post-demonetisation, there has been a significant rise in the willingness to use cashless modes of payments by both retailers and consumers, said the report released at the first anniversary of demonetisation of high-value currency notes.

“There is a huge untapped potential for mobile payments at unorganized kirana stores, where most Indians go to fulfil their daily needs," said Krishnan Dharmarajan, executive director, CDFI. “About 94% of shopkeepers have mobile phones, of which 41% were smartphones at the time of the March 2017 study. The recent influx of low-cost smartphones bundled with internet, should further push the surging interest in digital payments across both rural and urban India".

The study was done in two stages—pre-demonetisation (September 2016) and post-demonetisation (Feb-March 2017) with the sample of consumers and retailers from 11 districts across the country.

Forty-five percent of retailers intend to deploy a point-of-sale (PoS) machine. Current penetration (about 5% kirana retailers having a PoS device) and at least 35% of consumers having access to cards present a huge opportunity. Almost 38% of the retailers are willing to pay a transaction charge in excess of 1%, said the report.

According to provisional data released by the Reserve bank of India (RBI), debit and credit card usage at PoS machines fell marginally but the value of transactions showed slight increase in September. The volume of transactions fell by around 1% in September to 240 million transactions from 243 million transactions in the previous month. The value of transactions increased to Rs47,818 crore in September from Rs45,708 crore in August. The data considers card transactions of four banks only.

High penetration of bank accounts and mobile phones amongst both consumers (80% and 84%, respectively) and retailers (97% and 94%, respectively) and an inclination among consumers to use cashless modes should be tapped, said the report.

The report highlights that about 76% of the consumers “always" prefer to use cash, but this number seems to be reducing. In locations with moderate consumption levels, around 10% fewer consumers reported “always" using cash.

The first anniversary of demonetisation of high-value currency notes comes on 8 November.

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