Digital payments – a growing uptake with some barriers

This article is written by Devina, a gender and inclusion specialist.

This article is the final in a series of four articles understanding innovative gender-responsive lending approaches in India through the perspectives and experiences of female customers from economically and socially marginalised groups.

• The problem: Limited financial inclusion for women entrepreneurs in India due to barriers such as digital illiteracy, unreliable networks and ownership dynamics in digital payment accounts.
• Why it matters: Digital payments and UPI offer transformative opportunities for women entrepreneurs, but barriers like digital illiteracy and ownership dynamics hinder their financial independence and business growth.
• The solution: Addressing digital literacy through training, improving connectivity and prioritising women's empowerment in digital payment systems can unlock the full potential of these technologies, enabling women entrepreneurs to thrive and expand their enterprises.

In recent years, India has witnessed a remarkable transformation in the way financial transactions are conducted, particularly through digital payments and the Unified Payments Interface (UPI). This technological revolution has brought about significant opportunities for women entrepreneurs, especially those at the bottom of the pyramid in rural and urban areas. By enabling seamless and secure transactions, digital payments and UPI have empowered women to achieve newfound financial independence and expand their businesses. Let’s explore the opportunities, hear from women in the community, and acknowledge the challenges faced on this empowering journey.

Playing a pivotal role

Digital payments and UPI have played a pivotal role in promoting financial inclusion among women entrepreneurs. Previously excluded from formal financial systems, these women now have access to a wide range of banking services, enabling them to receive payments, access credit and manage their finances more efficiently, all through their phones. Meera, a rural entrepreneur, shares, “Accepting digital payments has boosted my business significantly. Now, I can cater to customers and give them options of payment methods as per their preference.” Digital payment solutions have expanded the market reach for women entrepreneurs, irrespective of their location. With the ability to accept digital payments, women can cater to a broader customer base, including those who prefer cashless transactions. This has eliminated geographical barriers, allowing them to tap into urban markets, access e-commerce platforms and explore new business avenues. She adds, “It is much easier to track my end-of-day sales also because all transaction history is on the app. Much easier to run a business now than before!”

Addressing challenges related to digital literacy and infrastructure remains crucial to ensure widespread adoption and equal access.

The flip side of this is that respondents have shared that even the customers have demonstrated more trust in the business, given digital payments. Fatima, an urban entrepreneur, says, “my customers see me as more professional now. They trust me more because they can pay me through any method and I am ok with it.” This insight underscores the significance of digital payments in building credibility and customer confidence. The convenience and flexibility offered by digital payment methods resonate with customers, demonstrating that the business owner is forward-thinking, adaptable, and responsive to their needs. As a result, customers feel more comfortable and secure engaging in transactions, knowing they have multiple payment options at their disposal.

Enabling ease of business

Gurpreet shares, “Digital payments have given me the confidence to expand my business operations. I no longer worry about carrying large amounts of cash or dealing with the complication of cash-based transactions, including having the correct amount of change. It adds time for me to make my pickles.” As shared by Gurpreet, the convenience and security offered by digital payment solutions have alleviated the challenges posed by cash handling, ensuring a smoother and more efficient business experience. Over 70% of our respondents shared that digital payments have enabled ease of business for them. By eliminating the need for physical currency, Gurpreet is no longer burdened by the logistical complexities and potential risks associated with cash transactions.

Barriers to digital payments

Despite these opportunities, there do exist barriers to female borrowers and entrepreneurs accessing and utilising digital payments. A significant barrier is the limited digital literacy among women entrepreneurs, especially those in rural areas. Many are unfamiliar with the intricacies of digital payment systems, leading to hesitation and reliance on traditional cash-based transactions. Bridging the digital literacy gap through awareness campaigns, training and simplified user interfaces is crucial for greater adoption. Additionally, almost 50% of respondents based in rural areas shared that the data quality can be improved to better access digital money apps. Limited access to reliable networks and smartphones poses challenges for women entrepreneurs who rely on digital payments for their businesses. Efforts to improve connectivity and expand digital infrastructure are essential to ensure inclusivity and enable smooth transactions.

Additionally, there are nuances around who is linked to the digital payments account. Lakshmi shares, “I have my own kirana store and I work as a female agent also. My husband co-owns the shop with me but he never comes to work. Now with digital payments, he has put his number on all accounts so he gets all the payments directly. It’s made me more dependent on him and his decisions. I prefer customers paying me cash because at least that I can account for and save. I have no control over what goes directly to the app.”

This experience highlights a nuanced challenge faced by women entrepreneurs in the context of digital payments. While digital payments offer convenience and efficiency, the underlying dynamics of ownership and access to the associated accounts can influence power dynamics within businesses and personal financial autonomy. In Lakshmi's case, her lack of control over the funds received directly through the app leaves her feeling disempowered and reliant on her husband for financial decision-making. This serves as a reminder that digital payment systems should be designed to prioritise the empowerment and financial independence of women entrepreneurs. There is a social norms and behaviour-related aspect of this access to digital payments that needs to be addressed, for the opportunities to be truly realised.

Digital payments and UPI have transformed the entrepreneurial landscape in the country. By promoting financial inclusion, expanding market reach and fostering economic independence, these technologies have unlocked tremendous potential for women entrepreneurs. However, addressing challenges related to digital literacy and infrastructure remains crucial to ensure widespread adoption and equal access. Rani, an aspiring entrepreneur, states, “The ease of accepting digital payments has encouraged me to start my own business. It makes it so much easier.”

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