About 36% MSMEs Struggle With Tech Adoption, 18% Cite High Costs: Report
PayNearby's 'MSME Digital Index 2024' shows 65 per cent of small businesses using digital tools, with a positive impact on operations and sales
In a notable shift, India's micro, small and medium enterprises (MSMEs) are increasingly embracing digital technology, according to PayNearby's latest report, the 'MSME Digital Index 2024.' The pan-India survey, which examines technology consumption among MSMEs, highlights that over 65 per cent of these businesses now incorporate digital tools into their daily operations.
The report underscores the positive impact of this digital adoption, with 68 per cent of MSMEs acknowledging improvements in both their business and personal lives. Specifically, 31 per cent of owners credit technology for enhancing operational efficiency, while 27 per cent report increased sales and income.
Despite the benefits, challenges remain. Resistance to adopting new technology is cited by 36 per cent of MSME owners and 18 per cent struggle with the high costs of implementation. Language preferences for understanding technology reveal a preference for English (52 per cent), followed by Hindi (21 per cent).
In financial services, UPI (43 per cent) and Aadhaar banking (38 per cent) are the most popular among MSMEs at the last mile. Additionally, WhatsApp and WhatsApp Business dominate messaging app usage, with a 97 per cent adoption rate.
The report, based on a survey of over 10,000 MSMEs in retail sectors such as kirana stores, mobile recharge outlets, medical stores, CSPs and travel agencies, shows a high digital savviness among young business owners. Notably, 75 per cent of MSME owners aged 18-30 are the most digitally adept, with 87 per cent using smartphones for daily business operations. This age group also reports higher monthly incomes, with 36 per cent earning over Rs 15,000.
Smartphones are the preferred digital device, used by 70 per cent of respondents, with 68 per cent using them for business activities. These users consume two to five gigabytes of internet daily, with over half spending less than Rs 500 per month on internet usage. Initiatives like Digital India and BharatNet have significantly improved internet accessibility in rural areas, further bridging the digital divide.
For internet access, 66 per cent of MSMEs use mobile hotspots at work, followed by Wi-Fi routers (26 per cent). Ethernet cables and dongles are less common, used by 5 per cent and 3 per cent respectively. At home, 75 per cent rely on mobile internet.
Work dominates digital device usage, with 36 per cent of respondents spending four to six hours on their phones for business purposes. For leisure, such as social media or entertainment, 66 per cent spend less than three hours daily. YouTube is the leading app for both social media (41 per cent) and entertainment (72 per cent). Notably, 58 per cent do not have gaming apps installed.
Among tech-savvy MSMEs, 29 per cent use accounting software, followed by POS (17 per cent) and CRM software (14 per cent). However, 6 per cent still rely on manual methods. Digital devices are primarily used to streamline financial transactions (41 per cent) and track expenses, while 18 per cent use them to accelerate processes.
Anand Kumar Bajaj, Founder, MD and CEO, PayNearby emphasised, “The MSME sector is pivotal to our economy and their adoption of digital technologies is crucial for India's growth. The MSME Digital Index 2024 showcases significant progress in technology adoption while highlighting persistent challenges. We believe that MSMEs should be supported in their digital transformation journey and ensure that technology's benefits reach every corner. By leveraging artificial intelligence (AI), augmented reality (AR) and machine learning (ML), MSMEs in rural India can thrive in a digital-first economy. We must foster an inclusive ecosystem that enhances skills and removes barriers, enabling all businesses to embrace digitalisation. Together, we must envision a future of limitless opportunities, driving economic growth and social upliftment in the real Bharat.”
Commenting on the MSME Digital Index, Jayatri Dasgupta, CMO, PayNearby said, “This comprehensive report underscores the importance of digital literacy and infrastructure in empowering MSMEs. Our findings show a promising trend of increasing tech adoption, but also point out the areas that require more focus and investment. There is a need to innovate and provide solutions that bridge the digital divide and drive progressive growth.”
“Focusing on women respondents, who represent 32 per cent of the survey, the data highlights the pivotal role technology plays in fostering women’s empowerment and financial independence. Among the female respondents, 85 per cent own smartphones, enabling their engagement in digital transactions. The growing usage of digital payments, at 40 per cent among women entrepreneurs, underscores their confidence in leveraging technology for business growth. PayNearby's Digital Naari initiative aims to further empower women by enhancing their digital literacy and providing them with the tools needed to achieve financial independence, ultimately contributing to a more inclusive and prosperous Bharat,” she further added.
