Digital payment technology and payment gateways create significant value for micro, small and medium enterprises (MSMEs) in India, while more than 9 million GST-registered MSMEs could be a potential market for advanced offerings from fintech companies.
According to ‘Indian MSME Impact Report 2019’ by fintech company Instamojo, 63 million MSMEs in India are engaged in a wide variety of businesses. The report is based on a six-month analysis of the MSME sector by Instamojo and Valuvox Business Solutions, during which 400 entrepreneurs were surveyed.
Around 75% of MSME respondents believe that technology helps solve many of the challenges they face, the report says, adding that small enterprises leverage online information, logistics and e-mail apps, social media, task management solutions and also train employees on technology.
As nearly 50% of MSMEs have adopted digital tools for business processes, payments, and online sales in India, the report states, around 9.2 million MSMEs registered under GST could be a potential market for advanced offerings from fintech companies. These advanced offerings could include business analytics tools.
The study also revealed a high level of MSME user satisfaction in digital payment technology. Nearly three-fourths of the respondents were very satisfied with their experience of digital payment products, while more than half of the MSMEs who responded to the survey considered payment gateway solutions to be very valuable.
Transactional convenience and monetary incentives to customers create value for about two-thirds of the MSMEs surveyed, while another 20% see value being created from customer preference for digital payment technology, data security and synchronization.
The report also states that Indian MSMEs face several critical business challenges such as credit deficit, unskilled labour, complexity of taxation and knowledge asymmetry. MSMEs expect digital payment technologies to address critical challenges related to finance, payments and accounting. Among those who use digital payment solutions, around 47% of the MSMEs are able to manage only a few of the critical challenges, while 20% are overwhelmed by some of the challenges.
Around 25-30% of the respondents who are able to manage these challenges have learnt new technologies or sought help from experts, the report states.