A significant new report by PayNearby, the MSME Digital Index Report, highlights the rapidly accelerating adoption of digital payment methods among micro, small, and medium enterprises (MSMEs) across India. The survey, which encompassed 10,000 individuals and MSMEs predominantly in retail-focused sectors such as kirana shops, mobile recharge outlets, chemist stores, customer service points (CSPs), and travel agencies, reveals a strong preference for digital transactions in fostering business growth and operational efficiency.

The report's key finding indicates that nearly half, specifically 48%, of the surveyed MSMEs, have chosen the Unified Payments Interface (UPI) as their most preferred payment method. Following closely, Aadhaar-enabled banking secured the second spot with 39% of respondents favoring it. Interestingly, among women entrepreneurs, Aadhaar banking demonstrated even greater popularity, with 42% expressing a preference for this secure system, which leverages fingerprint or face recognition for transactions, underscoring a growing trust in such tech-enabled services.

Beyond payment methods, the report also sheds light on the pivotal role of smartphones in modern business operations. A substantial 71% of all respondents now utilize smartphones as their primary device for running their businesses. This figure climbs even higher to 84% when focusing specifically on women business owners, illustrating a pervasive integration of mobile technology into entrepreneurial activities.

The benefits of digitalization are clearly evident to MSMEs. One-third of the respondents reported experiencing improved operational efficiency as a direct result of embracing digital tools. Furthermore, a significant majority—over 73%—of small businesses located in semi-urban and rural areas have observed either increased income or smoother day-to-day operations attributed to the adoption of digital solutions. This points to the tangible economic advantages and practical improvements digitalization offers across diverse geographical segments.

An emerging trend noted in the report is the cautious but growing exploration of advanced technological solutions. A small yet notable 7% of MSMEs have begun to explore automated or AI-powered tools, including inventory management applications, automated billing systems, and customer engagement platforms, often through third-party providers. This indicates a nascent but crucial step towards further technological integration and sophistication within the sector.

Anand Kumar Bajaj, Founder, MD & CEO of PayNearby, emphasized the strategic importance of these findings, stating, “The MSME sector is the backbone of Bharat’s economy, and the rapid adoption of digital tools such as smartphones, UPI, Aadhaar-enabled banking, and emerging AI workflows is proof that this segment is embracing modernisation.” PayNearby itself, a DPIIT-certified firm, plays a significant role in this digital transformation, providing branchless banking and extensive digital services throughout the country.