Why UPI Payments are a Game Changer for Small Merchants in India
-By Priyasy Bokadia May 18, 2023 4 Min read


Since the 2016 demonetization drive, India's economy has been rapidly moving toward cashlessness. India has seen a significant shift in how people conduct business thanks to the rise of e-commerce, digital payment options, and increased internet access. The Unified Payments Interface (UPI) is one of the most widely used digital payment options in India. UPI is a real-time payment system that lets mobile phone users instantly transfer money between bank accounts. UPI, which was introduced in 2016 by the National Payments Corporation of India (NPCI), has changed the way Indians pay and changed the game for Indian SMEs.

The volume of peer-to-merchant (P2M) transactions in India has been on the rise in recent years. Here are some key statistics from National Payments Corporation of India (NPCI) for February 2023 vs February 2022 -

Peer-to-merchant (P2M) UPI

  • Growth percentage: 119%
  • Volume in February 2023: 415.32 crores
  • Volume in February 2022: 189.58 crores

Value of transactions

  • Growth percentage: 71.1%
  • Value in February 2023: Rs 2.79 lakh crore
  • Value in February 2022: Rs 1.63 lakh crore

Advantages of UPI

Here are some of the factors that make UPI payments revolutionary for India's small businesses and have contributed to exponential growth in the payments sector:

- Hassle-free and Convenient

UPI payments, or Unified Payments Interface, offer unparalleled ease and convenience to both customers and merchants. Customers no longer need to carry cash or credit cards to make payments with UPI. Merchants can seamlessly receive payments directly into their bank accounts, eliminating the need for a Point of Sale (PoS) machine or any third-party. This simplicity makes UPI payments an effortless and cost-effective choice for small merchants, cementing its status as one of India's most successful payment systems which is now being adoped globally as we speak.

- 0 Transaction Cost

One of the standout benefits of UPI payments is their zero transaction cost, a stark contrast to other digital payment methods. Merchants incur no transaction fees* with UPI, unlike traditional payment systems. This affordability makes UPI payments an attractive alternative for small businesses that may struggle with the high fees and insfrastructure cost with PoS.

- Faster Settlements

Thanks to UPI, merchants can enjoy instant payment settlements directly into their bank accounts this differs from bank to bank and the paymnet aggegator you have onboarded with. This process stands in contrast to the delays often seen with traditional payment methods, enabling merchants to access their funds without waiting for days. Faster settlements empower small merchants to enhance their cash flow and manage their finances with greater efficiency and not be stranded in times of need.

- Strengthened Security

Security is paramount in the online world of scams and fraud and UPI payments is no different. Customers need to input their UPI PIN to authorize or in simple terms make a payment, ensuring that only the account holder i,e you can initiate payments. The system employs robust two-factor authentication and encryption protocols to safeguard the financial and personal data of consumers, making UPI payments a trusted and secure choice for SME merchants.

- Increased Sales

Who doesn't love more business? UPI payments have the potential to significantly boost both the volume and value of transactions for SME merchants. With UPI, customers can effortlessly make payments without the need for cash or credit cards, making it an instant hit. This accessibility translates to increased customer engagement and higher sales for small businesses. Moreover, the seamless checkout experience offered by UPI payments fosters repeat business, enhances customer loyalty, and drives greater footfall for business owners regardless their industry.

- Integration with other Payment Services

The versatility of UPI transactions extends beyond basic payments, allowing merchants to bundle services such as bill payments, online shopping, and digital wallets. This flexibility enables SME merchants to offer a comprehensive range of services to their customers, thereby attracting a broader client base and boosting revenue streams. Furthermore, UPI payments can seamlessly integrate with accounting software, empowering small merchants to streamline their financial management processes efficiently which means today the merchants have more to focus on business expansion rather than being caught up with daily operations.

RBI’s #HarPaymentDigital

The recent launch of #HarPaymentDigital by the Reserve Bank of India (RBI) aligns with the goal of promoting digital payments and encouraging a cashless economy. #HarPaymentDigital is an awareness campaign launched by the RBI to encourage individuals and businesses to adopt digital payment methods for all transactions.

As discussed earlier, UPI payments have emerged as a game-changer for small and medium enterprises (SMEs) in India, allowing them to improve their cash flow and manage their finances more efficiently. With #HarPaymentDigital, the RBI is promoting using UPI payments and other digital payment methods to make transactions more seamless, convenient, and secure. The #HarPaymentDigital campaign aims to educate and encourage people to adopt digital payment methods for all types of transactions, from paying utility bills to making online purchases. By promoting the use of digital payments, the RBI hopes to reduce the dependence on cash transactions and promote financial inclusion.

The launch of #HarPaymentDigital by the RBI is a step towards a cashless economy and aligns with the benefits of UPI payments for small merchants. The campaign is expected to drive the adoption of digital payments in India and contribute towards making the country a cashless economy.