Digital Transformation Aids MSMEs in Surviving Inflation

The digitalisation frenzy that was gradually taking shape before the start of the pandemic suddenly boomed into an indispensable mechanism to determine the sustainability of Micro, Small, and Medium Enterprises (MSMEs). Following the first Covid-19 wave, restaurants employed digital tools and operated within a comprehensive digitized ecosystem that helped them streamline everything from customer orders to payment and post-service follow-up. 

In terms of mere numbers, kirana stores contribute up to 75 per cent of the entire trade managed by MSMEs. But since kirana stores and other MSMEs are more susceptible to shocks to the labour supply, supply chain, and the final demand for goods, sailing through the pandemic would require paradigm changes such as the ease of transactions, transformed supply chain management models and models connecting MSMEs to the booming digital economy. Therefore, to minimise such risks, incorporating digitalisation of operations in Kirana stores and MSMEs alike is a more resilient option. 

Riding the Covid-Curve: How MSMEs Ensure Sustenance

As per a study conducted by the Asia-Specific Economic Cooperation (APEC), MSMEs make up over 98 per cent of all enterprises in the APEC countries. Since Kirana stores (a significant part of MSMEs) along with other enterprises are hit as a result of the pandemic, the local economies have descended into a downward spiral. The volatility of the MSME businesses can only be neutralized by integrating the benefit of contactless digital payments, cost-effectiveness, reduced risk of fraud, streamlining of payments, and reduced burden of administration. 

While the digital transformation improvises the functioning of MSMEs, the trick is to effectively push micro-enterprises like kirana stores into the digitalisation girdle. Most transactions in kirana stores happen in person and all accounts, including credit accounts, are manually stored using pen and paper. Running a day-to-day business without backed up records of digital transactions, the facility for digital payments and gateway for customer communication is a tedious task in the era of online businesses, more so during the pandemic when e-commerce thrives inexorably. Pushing the Kirana stores towards digitalization would not only provide the more tenable premise for these stores to survive and not perish in the face of cut-throat competition but would also ensure that businesses expand through enhanced customer satisfaction. 

Here are some aspects of digital transformation that kirana stores and MSMEs must look towards to facilitate ease of business henceforth. 

Contactless Digital Payments 

Amid the pandemic, every business is adopting a safer way to transact while avoiding the exchange of physical cash. From shopping plazas to restaurants, businesses have transcended into smart stores, which streamline everything from customer orders to initiation of order payment through a digital ecosystem. Not only does the availability of goods and services online and contactless digital payments reduce the physical presence of the customer at the stores, but they also help merchants manage their transactions effectively. 

Reduced Time and Enhanced Cost-Effectiveness 

Reduce payment process time and enhanced cost-effectiveness of the retailer owing to a better understanding of the spending patterns are among the several benefits of MSME digitalisation. Additionally, a digitalised record of the credit transactions shall reduce bad debts and enhance regular cash flow. 

Reduced Risk of Fraud 

Within a digitised business ecosystem, every transaction has a digital footprint and can be traceable which, therefore, would reduce the risk of fraud. Moreover, there is no risk of moving money physically from one place to another. 

Reduced Administrative Burden 

Digital payments reduce the administrative burden of having to look after manual cash transactions. Since various administrative roles including the burden of taking note of manual orders, managing cash payments, and post-sale follow-up are eliminated, the business administration can think about providing specialised services to the customers, therefore having a competitive advantage over non-digitised enterprises.  

The Retail Pod 

The retail pod is a useful digital tool to automate all payment acceptance tasks at every Kirana store's cash counters. The pod uses sound waves to make a connection with the payer's device and completes transactions seamlessly. 

Peer-to-Peer Payment 

Peer-to-Peer Payment is the innovation of ToneTag Technology, which helps in the digital transfer of money. Being a proximity-based payment system, the payer and the payee must stand at a distance of at most 6 feet for the payment to be successful. 

The pandemic leads us to a new digital era that shall only expand in the time ahead. To make the cut, MSMEs must come up with adaptable digital models that set them on par with the fast-moving business world in the forthcoming years. 

The author is Founder and CEO, ToneTag

DISCLAIMER: Views expressed are the author’s own, and Outlook Money does not necessarily subscribe to them. Outlook Money shall not be responsible for any damage caused to any person/organisation directly or indirectly.