Indian merchants do not want to go digital

Over the last few years, digital payments have been given a big push by the government. But even after drastic measures like demonetization, the rate of adoption of digital payments remains modest in India. A new research study by Carly Trachtman of the University of California, Berkley and others argues that the low rates of adoption are driven by demand-side factors rather than supply-side factors. Supply-side issues such as inadequate or expensive infrastructure and limited access to the internet are considered barriers to digital payments. However, the authors find that merchants do not go digital because they believe customers do not want to make digital payments and they are concerned that records of mobile payments might increase their tax liability.

Using survey data from 1,003 small scale store merchants in Jaipur, Rajasthan, the authors find that 60% of the merchants surveyed had not adopted digital payments of any kind – even though most firms had the ability to do so.