There are multiple payment options for SMEs to choose from. Majority of the SMEs prefer the UPI way as that is the easiest and most widely used for payments.
Best Payment system for SMEs and how that can affect the revenue.
Small and medium-sized enterprises (SMEs) have a huge contribution towards the development of the Indian economy.
However, many SMEs in India face challenges when it comes to receiving and managing payments. In this article, we will discuss the best payment systems for SMEs in India and how it can affect their revenue.
Many SMEs face a lot of payment issues due to inadequate arrangement of payment systems and as a result of that their businesses are affected and this creates a negative ripple effect on the entire MSME sector as a whole leading to loss of revenue. It is important for the industry stakeholders to identify the ongoing payment issues that businesses are facing and try to find a holistic solution for the same.
The UPI solution:
One of the most popular payment systems for SMEs in India is the Unified Payments Interface (UPI). UPI is a real-time payment system that allows users to transfer money instantly between bank accounts. It is a government-backed initiative that was launched in 2016 and has since become the preferred payment method for many people in India. UPI has remained the current standard of SME payment gateway for major businesses in the country from the time of its inception. The system has undergone many revisions and has been approved by majority of the top official bodies dealing with finance in our country.
One of the biggest advantages of UPI is its ease of use and the applicability as a payment system for small business. It is a simple and user-friendly system that can be accessed through a mobile app. Users can link multiple bank accounts to their UPI ID, making it easy to manage payments from different sources. This is particularly useful for SMEs that may have multiple bank accounts for different purposes.
Another advantage of UPI is its low transaction fees and fast transaction finality. Unlike traditional payment methods such as credit cards, UPI charges minimal transaction fees. This can be a significant cost-saving factor for SMEs, particularly those that process a large volume of transactions and trade on a frequent basis.
Mobile wallet applications :
In addition to UPI, there are several other payment systems currently available for SMEs in India. These include mobile wallet applications such as Paytm and PhonePe, which allows users to store money in a digital wallet and make payments through their mobile phones.
These wallets are popular among consumers, particularly those who do not have a bank account. SMEs can benefit from accepting payments through mobile wallets as it allows them to reach a wider customer base.
Bharat Bill Payment System :
Another payment system that SMEs can consider is Bharat Bill Payment System (BBPS). BBPS is a one-stop platform for all bill payments, including electricity, water, gas, and telephone bills. SMEs can use BBPS to accept payments from customers who need to pay bills. This can be particularly useful for SMEs that provide utility services or bill payment services.
Impact of Payment on Revenue :
So, how can the choice of payment system affect the revenue of SMEs in India? The answer to that lies in customer convenience. Today consumers expect ease and flexibility when it comes to payment options. If there is non-availability of an easier SME Billing system that is convenient for its customers, it may lose business to competitors that do so. It has become paramount for SMEs to keep a watch on the alternative payment solutions that might potentially help them reach a wider customer base.
By offering multiple payment options, SMEs can cater to the diverse needs of their customers. For example, if a customer prefers to pay through a mobile wallet, an SME that accepts payments through mobile wallets is more likely to get that customer and business. Similarly, if a customer prefers to pay through UPI, an SME that accepts UPI payments is more likely to retain that customer and thus continue doing business.
In addition to customer convenience, the choice of small business payment system can also affect the speed and efficiency of payment processing. UPI, for example, allows for instant transfer of funds, which means SMEs can receive payments quickly and efficiently. This can have a positive effect on cash flow impacting overall SME revenue and thus help to improve the financial efficiency of the business in question.
Security concerns:
Security is an important factor to consider when dealing with online payment systems for SMEs. Finally, the choice of payment system can also affect the security of transactions that are happening. With the rise of digital payments, security has become a top concern for consumers and businesses alike. By choosing a payment system that is secure and reliable, SMEs can build trust with their customers and enhance their reputation thereby increasing the chances of repeat business from the same customers.
It is thus clearly evident that the best payment system for SMEs in India is one that offers convenience, speed, efficiency, and security. UPI being the most widely used also has the first mover advantage. Other alternative payment solutions like mobile wallet application (paytm & phonepe) & BBPS are some of the popular payment systems available to SMEs in India. Small business payment systems need to be carefully selected based on the scope of the business and the volume of transaction that are being dealt with.
It is of extreme importance for the SMEs to choose the right payment system that has the ability to offer multiple payment options and thus improve customer satisfaction, increase revenue, and stay competitive in today digital economy taking the MSME ecosystem to the next level and thereby having a positive impact on the Indian economy.
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