At the beginning of 2018, NPCI (National Payments Corporation of India) mandated the use of Bharat QR (Quick Response) for every Unified Payment Interface (UPI) application in the country for responding to merchant payment requests. The circular also directed the need to respond to collection requests from other UPI addresses and generate/ support scanning features for Bharat QR and UPI QR codes.

Digital Payments have come a long way for Merchants since then. Especially after the pandemic hit, customers and merchants have become more than happy to adopt multiple forms of digital- based Payments. It evidenced a massive shift within a few years from the cash-dominated ecosystem.

The last two years have been extremely rough for small and medium-sized merchants. From the pandemic to inflation, fear of recession, and dwindling customer confidence, they have been through it all. To help them get out of the rut, they will need the help of a robust payment system and an entire framework that can contribute in its entirety. Thereby, the call for a one-stop the solution is on the rise from the merchants.

Merchants are also seeing the unwavering growth on the consumer side of things and have started demanding the same for themselves. The intertwined relationship between business and personal finance necessitates that the payments side will require more strength.

That merchants are customers too, brings another vital facet to the game. In all likelihood, if they like a specific solution from an end-customer standpoint, they are more likely to want to inculcate it for their business. It means while results can be relatively easy to unearth, the implementation would be a tough nut to crack. So, it is unlikely that a single enterprise can do it all. Taking care of merchants would need contributions from multiple players beyond payments.

The inculcation of UPI and Bharat QR has been a welcome change, but it is vital to remember that partnerships remain a key leverage point in this fragmented ecosystem. Banks, Fintechs, payment processors, and merchants must realize that if they want to excel at payments, they will have to forge a win-win relationship for all the parties involved. It will also automatically handle Reconciliation, Settlement, and other related aspects effortlessly.

Add to that, the government is pushing the ONDC (Open Network for Digital Commerce), a one-of-a-kind initiative based on open protocols and trust. Merchants would not be able to play their part unless their payment side has been looked after.

Thankfully, the success of UPI and Bharat QR has paved the way for developing innovative financial solutions in the country. In addition, RBI (Reserve Bank of India) has been very vocal about the need to be interoperable, which is another move to strengthen and facilitate a seamless merchant payments ecosystem.

Additionally, fintechs have been able to successfully supercharge the adoption of UPI by developing QR code-based merchant acceptance networks. But the growth has primarily been limited to Tier 1 and Tier 2 cities, with Tier 3 cities getting the taste of it pretty late.

For financial bodies to be able to crack the merchant payments code, they will have to adopt a merchant-centric lens first. It would help them deduce ways to uniquely serve them as customers and find meaningful ways to partner and contribute to the success of their business as a whole. So, what is the solution? Banks and fintech can collaborate with other players in the ecosystem, such as logistics, which would help create a unified solution that solves multiple problems. For example, developing a payments app that supports local discovery can be a game-changer. It would enable the merchants to use traffic as one of their key enablers to success instead of being bogged down by it.

Another example would be the integration of loaning services with the payments ecosystem. So, whenever a merchant is short on funds, they can directly apply for a working capital loan instead of having to visit multiple bank branches and wait for days for their request to be processed. While ONDC is a thoughtful move from the government to provide small and medium-sized merchants with the traction they deserve, it would need the reimagining of digital commerce. It would need a rethinking of the way payments are handled to ensure it is able the achieve its aspirational targets. This open network will ensure that merchants are provided with a level playing field to compete against the larger e-commerce businesses. This will also enable the merchants to focus on one platform and concentrate efforts on promoting their products with the support of the relevant network stakeholders.