About 42% of local neighbourhood grocers that have been using Paytm have switched to other payment apps and another 20% kirana stores plan to follow suit, shows a study by Kirana Club, which has 1.8 million kiranas across the country in its network.
This comes after the Reserve Bank of India last week directed Paytm, one of the largest payments apps in the country, to cease accepting new deposits and allowing credit transactions after February 29 due to supervisory concerns and non-compliance of rules.
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The mass exodus is despite Paytm through its app reassuring users that the app will continue to work as usual beyond February 29 though they won’t be able to add money to the Paytm wallet after that date.
Nearly 69% of mom-and-pop stores surveyed by Kirana Club have been using Paytm and more than two-thirds of them said their trust in the payment app decreased post the RBI ban.
However, they are fairly confident that the development will not impact their business.
“While the ban imposed by the regulatory authority might lead to disruption, kirana stores are not much worried because there are alternate payment options available,” said Anshul Gupta, founder of Kirana Club, a networking platform for kirana owners. “Our recent survey also indicates that kiranas across states have already started using or plan to use other payment apps to ensure smooth business operations,” he added.
Out of the retailers who have started using or are planning to use other payment apps, half of them prefer PhonePe, followed by 30% on Google Pay and 10% inclined towards BharatPe, according to Kirana Club data.
In India, kiranawallahs account for three-fourths of the fast-moving consumer goods (FMCG) sales, and most companies have been trying to increase direct reach.
During the Covid-19 pandemic, the neighbourhood kirana stores increasingly adopted digital payments. Over time, they have also realised the convenience of accepting digital payments as they do not have to go through the hassle of giving change to customers and money gets transferred to their bank accounts immediately.
Paytm pioneered mobile payments in India and led mass adoption with innovations like QR codes and Soundboxes.
“While Paytm is diligently pursuing an extension and seeking clarity from the RBI regarding the transfer of its wallet business license and Fastag service, the plight of uninformed vendors remains overlooked,” said Sanjay Tripathy, co-founder and chief executive of BriskPe, a B2B cross-border payments fintech company focusing on small businesses. “As small merchants scramble to protect their livelihoods by exploring alternatives, the lack of a clear awareness campaign on RBI restrictions is a significant oversight,” he said.
Last week, Paytm had told investors that it is confident of retaining merchants and the users, and the idea is to have least disruption to merchants because it’s a large infrastructure, and people should not get inconvenienced.
“We are talking about 40 million merchants out there on UPI acquiring… All those merchants also do other acquiring,” Bhavesh Gupta, president and chief operating officer of the payments platform, had said in an analyst call. Such a large set of migration will need “guidance from both the NPCI and RBI and the discussions have started”, he had said.
There are about 12 million mom-and-pop stores in India, of which only about 0.12%, or about 15,000, are tech-enabled, according to analysts.
Given the increasing shift towards a cashless economy and user preference for transacting via smartphones, mobile payments continue to scale rapidly, further boosted by the growth of mobile commerce and services.
As a result, unique online transacting users, transacting for services such as online banking, mobile top-ups, in-store payments, etc. are expected to grow from 250-300 million in FY2021 to 700-750 million by FY2026, according to Redseer.
Last week, traders’ body Confederation of All India Traders (CAIT) issued a cautionary advisory to traders to switch from Paytm to other payment options, urging them to make informed decisions and mitigate any potential adverse effects on their financial operations.