Importance of MSMEs in driving India's growth, role of digital infra and way forward, explains Mastercard's South Asia COO Vikas Varma

Realising the immense potential that India's Micro, Small and Medium Enterprises (MSMEs) have, Modi government has laid special focus on the sector. Even under Aatma Nirbhar Bharat Package and Mission, MSMEs are in the spotlight. And, the role of MSMEs become even more important in this trying times of Covid-19 pandemic amid Modi government's 'Vocal For Local' campaign. Vikas Varma, COO - South Asia, Mastercard, in an exclusive interview to Zee Business Online explains the importance of MSMEs in driving India's growth, the role of digital infra and the way forward. Here are edited excerpts:- 

What is the importance of micro, small, and medium enterprises (MSMEs) in driving India’s growth in digital payments? 

India has over 63 million Small and Medium Enterprises (SMEs) that employ around 114 million people and contribute nearly 35 percent of the country’s GDP. By the sheer volume and value add by MSMEs, one can assess their impact to the Indian economy and thus see their critical role in India’s digital journey. 

Prior to the outbreak of Covid-19, around 90 percent of retail payments in India were in cash. While some of these numbers may have changed a bit, there is a huge opportunity for the growth of digital payments ecosystem in the country and given the economic and societal impact that MSME’s make, its critical they are part of the digital growth agenda. 

What are the initiatives undertaken by Mastercard to enable their business recovery? 

An estimate by the Confederation of All India Traders (CAIT) suggests that Covid-19 will force about 20 percent of MSMEs out of business. The pandemic has also caused some rapid and long-lasting shifts in consumer behaviour. Small merchants will need to adjust quickly to stay competitive. Thus, there is a greater appetite among them to establish their digital footprint, with relevant solutions and at a viable economic cost.

Mastercard has recently committed Rs 250 crores to support small businesses in India. As a part of this commitment, Mastercard will roll out initiatives like growing digital payments awareness, providing low-cost acceptance solutions – online and offline, drive inclusive growth by enabling small merchants and kirana stores with access to credit and empower women entrepreneurs by increasing their business acumen. 

Prior to this too, Mastercard has been working relentlessly to empower MSMEs. We have a stated commitment to equip 10 million merchants in India with digital payments acceptance infrastructure. I am also happy to share that we have made a significant progress towards this goal. To achieve this, we are broadly doing two things. First, we are partnering with new age fintech companies such as Worldline, PaySwiff, Mosambee etc. to create low cost, multi-purpose payments acceptance solutions for MSMEs. We recently launched Soft POS in collaboration with Axis Bank and Worldline, which is a digital point-of-sale solution that allows merchants to accept payments through various digital form factors including Bharat QR, simply using their smartphones. They do not need any new hardware infrastructure. This is the first such payment acceptance solution globally and it is made in India, for the world.

Second, we are building awareness among merchants about safety, security, and convenience of digital payments through our marketing campaigns. In October 2019, we launched ‘Team Cashless India’, a nationwide, long term campaign that encourages all Indians to nominate one or more merchants who currently do not accept digital payments. Mastercard then works together with CAIT, acquirer banks and fintech companies to support nominated merchants to deploy digital payments acceptance infrastructure. So far, the campaign has received more than 13,000 nominations (and counting). We also run programs for education and awareness of women entrepreneurs to increase their business acumen. Under the program, we provide training and basic technology education to women kirana owners, using BuddhiMoney, an animated character that speaks the local language.  We successfully reached out to over 10,000 micro and small enterprises (MSEs) in Rajasthan. This helps them with ease of doing business, increased access to credit and market access. 

What are the benefits witnessed by partnering and providing solutions to Indian MSMEs?

As I said earlier, MSMEs are a critical element of India’s economy. The adoption of digitization of MSMEs is an opportunity for a self-reliant India, which has also been the aim of the Government. It can further uplift them by scaling up their profits and translate into several other benefits such as reduced accounting errors, less manual reconciliation, e-invoicing, etc., resulting in improved business efficiency. When they digitize, they have access to a much wider market and contribute to EODB rankings (Ease of doing business). They also build their credit profile that helps them secure liquidity from banks and other financial institutions. There is also a ripple effect across the consumer spectrum. Thus, these businesses can scale up and play an even bigger role on the socio-economic landscape. At the macro level, this will expedite India’s journey to be a cashless economy and contribute to employment opportunities.  

What are the challenges faced in the acceptance and adoption of technology and digital payments?

The biggest challenge towards acceptance and adoption of digital payments is the lack of awareness about benefits of digital payments. There are also several misconceptions and myths about safety and security. We have been actively engaged with merchant bodies like CAIT since the last five years to grow digital payments awareness, and support on-boarding of merchants for digital commerce. The results have been encouraging and we are committed to work further in this direction. We will also continue to work towards building a secure payments ecosystem and inspire trust in digital payments. 

What is the possible strategic approach and way forward for MSMEs in India?

Digitally engaged MSMEs are more likely to grow their customer base as it makes them more accessible by the users. They also find themselves more eligible for bank loans and can easily scale up their business. Thus, digitization of MSMEs is of utmost importance for the economy. The Government of India has introduced a series of measures that help MSMEs register their business and secure easy loans, connect with the financial mainstream, and play an active role towards country’s growth. Mastercard will continue to support the Government towards this endeavor.