More Than 40% Consumers Use Digital Payments In Tier 3–6 Cities, Says Chase India Report

More than 40% of consumers in Tier 3 to Tier 6 cities use digital payment on a daily basis, while 45% claimed to use it once in two days, according to a new survey.

"This reflects the frequent usage of digital payments by consumers, even in Tier 3 to 6 locations of the country," said a report by Chase India on the State of Digital Payments in India.

The report identifies the major challenges that merchants and consumers face in the adoption of digital payment services at the grassroots level.

According to the report, close to half of the merchants who are not using digital payments in rural India are not aware of the service.

In contrast, there are 94% of consumers who are aware of digital payments but don't use it because they face issues like lack of internet connectivity, limited knowledge, mistrust in online payments and service-related problems.

The report indicated that approximately 74% of consumers reported using digital payment services for transactions made by family members.

Additionally, the report also said that around 41% of merchants stated they received less than 25% of their sales through digital payments, while about 15% of merchants reported that over 50% of their sales were conducted via digital payments.

"This shows the potential left to be tapped with respect to increasing the usage of digital payments at the grassroots level," the report said.

A total of 2,240 respondents were surveyed for the report, including 1,184 consumers and 1,056 merchants, spread across 16 districts, covering eight states in different geographic zones of the country.

The report also said that lack of awareness about digital payments was a crucial finding. Around 46% of merchants had never used digital payments because they were unaware of it.

The survey revealed that, on average, around 36% of merchants claimed to be processing over 50 digital payment transactions every month. Also, around 23% of merchants claimed to be processing not more than 1 digital payment transaction every alternate day.

Most merchants process digital payment transactions of less than Rs 15,000 every month. Only a handful of merchants claimed to process digital payments of over Rs 1 lakh.

The main challenges that hinder the adoption of digital payments were inadequate infrastructure, service-related issues, capacity constraints and lack of trust in digital payments, it said.

"KYC is a vital step in onboarding merchants for using digital payments services. However, the survey discovered that nearly one in three merchants faced difficulties in completing the KYC process due to a lack of requisite documents, capacity constraints and the time taken for onboarding, among other reasons," the report said.

(With Inputs From PTI)