How Kirana Stores Are Going Digital To Drive Last-Mile Financial Inclusion

How Kirana Stores Are Going Digital To Drive Last-Mile Financial Inclusion


Kirana shops account for more than half of all grocery purchases in India, and they handle 90% of the country's $600 Bn grocery business

Kirana shops can help fintechs increase last-mile connectivity by solving the identification problem with Aadhaar, having strong financial infrastructure and being willing to accept further compatibility

Kirana shops will only be able to realise the promise of a $10 Tn economy by establishing strong partnerships between the fintech sector and the merchant network

The significance of kirana shops in India was highlighted by the pandemic. Indian customers during lockdowns shopped more at their neighbourhood stores rather than ordering groceries online. There is a chance for kirana shop owners, communities, and the Indian economy as a whole to reap the benefits of digitalisation in India.

The role that these retailers play in the Indian economy cannot be overstated. Kirana shops account for more than half of all grocery purchases in India, and they handle 90% of the country’s $600 Bn grocery business.

Even though kirana shops are common, the market for them is fragmented. Lacking the scale and common ownership of hypermarkets and the internet, these stores cannot take advantage of economies of scale.

However, the time has gradually changed. Many kirana shops saw the opportunity for expansion and started thinking about ways to advertise using digital means. In many Indian cities, residents have regained faith in their hyper-local communities. 

Kirana shop owners are also eager to form partnerships with online distribution and supply platforms in order to capitalise on the new opportunities. In addition, the pandemic accelerated the rate at which local kirana shops adopted technology.

Apps are becoming increasingly popular among those who run kirana stores as a means of facilitating growth and streamlining operations. A poll found that 58% of traders in major metropolitan areas and 46% of traders outside of these areas felt that the pandemic requires a switch to a digital platform. Kiranas stores have been a lifeline for many people in both rural and urban areas of India by allowing them to make and receive money transactions even when the country was on lockdown.

Due to the considerable distances needed to reach an ATM, many people in rural areas resorted to withdrawing cash from kiranas businesses instead. There were new types of businesses created, and these helped local shops learn how to use innovative features like ‘Knock and Pay’ and ‘Cashless Pay’ with QR code scanning. 

More and more kirana shops have abandoned ecommerce in favour of home delivery services. Almost 90% of India’s native grocery retail market is driven by the almost 12 Mn neighbourhood kirana outlets. 

India’s kirana shops have been beautifully moving to the digital plane to aid in all elements of their market throughout the pandemic, and millions of people are looking forward to seeing how kirana shops will continue to push this forward in the coming days.

The Surge Of UPI Transactions & Digital Product Offerings 

There has been a positive disruption to the digital payments ecosystem due to the emergence of numerous new businesses providing a wide range of services that are collectively increasing the widespread use of digital payments. 

Consumers in India have been pushing for the widespread use of UPI thanks to the efforts of major international and domestic fintech companies. This has been made possible by the establishment of a widespread network of QR-code-based merchants who accept UPI payments, as well as by the availability of intuitive user interfaces, cutting-edge products, and a thriving ecosystem of open APIs.

We have an advantage for fintechs to increase last-mile connections because we’ve solved the identification problem with Aadhaar, have a strong infrastructure to move money (whether it be IMPS, UPI, or Bharat QR), and are willing to accept further compatibility.

Growth Of mPOS Services 

The growing need for digital payment methods at brick-and-mortar retailers demonstrates how corner shops are vital to closing the infrastructural gap and fostering financial inclusion at the last mile. Solutions that match vertical needs, such as point-of-sale terminals integrated with distribution network accounts payable and receivable management, inventory control, and customer relationship management (CRM) technologies, have the potential to further boost merchant engagement. 

Retailers benefit from integrated POS solutions because they can centralise their accounting and payment processes, streamline their payments to suppliers and collection of accounts receivable, and encourage repeat business through the provision of personalised loyalty programmes.

Adoption Of Business Models By Fintechs 

The neighbourhood shopkeeper can now meet two of the semi-most banked’s pressing needs — sending money home and getting cash out. This ‘aided agent’ concept makes it possible for rural areas to receive direct transfers of government funds without residents having to leave their communities or struggle with complicated digital systems.

Another hindrance to formalisation in rural areas is the unpredictability of income, which prevents residents from taking out loans, saving to take advantage of interest, or even purchasing insurance due to the high costs involved. 

Financially underserved groups in India can be reached by sachetisation of services, which allows for the personalisation of financial products and services to be within the means of these groups. To put it another way, it will make it possible for previously underserved areas to save, borrow, and invest safely. Now that UPI is widely available on credit, shops can join the ranks of nanopreneurs by providing micro-credit to their communities.

If fintechs provide credit-based solutions to these mom-and-pop shops, it will facilitate the development of digital banks throughout the country. To take the less-cash road efficiently while still creating jobs and generating revenue, businesses and fintechs must collaborate to develop a seamless digital experience from beginning to end. 

The Online Network of Digital Commerce (ONDC) will similarly bring ecommerce to India’s rural areas. Due to the expensive fees and commissions of existing ecommerce platforms, small companies will now have an opportunity to be discovered and seen by a much wider audience than ever before.

Future Roadmap 

India has a large underbanked and underserved population, and there is a lot of room for improvement in the country’s digital payment infrastructure. Today’s cutting-edge computer platforms are ripe for innovation, building, serving, and scaling up financial services such as bank accounts, credit cards, investments, and insurance policies. 

The country’s largest rural population gains the most from financial inclusion when smart supply chain management technologies and the ease of digital payments are made available to them. It opens up prospects for expansion and fosters a system that is advantageous to stores. 

The rural economy is ready to expand in ways that benefit more people now that their massive consumption potential has been realised. The next wave of growth will be driven by fintechs. We will only be able to realise the promise of a $10 Tn economy and fully realise our potential by establishing strong partnerships between this sector and the merchant network.

Note: The views and opinions expressed are solely those of the author and does not necessarily reflect the views held by Inc42, its creators or employees. Inc42 is not responsible for the accuracy of any of the information supplied by guest bloggers.

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