UPI, Aadhaar Drive 61% Of MSME Retail Transactions: Report

New Delhi, Jun 23 (KNN) Digital adoption among India’s micro, small and medium enterprises (MSMEs) is accelerating, with UPI and Aadhaar-enabled banking accounting for a majority of transactions in semi-urban and rural retail outlets, according to PayNearby’s MSME Digital Index Report 2026.

The report found that 61 percent of transactions at last-mile MSME retail stores are now conducted through UPI and Aadhaar-based banking systems, reflecting a steady shift towards formal digital payment channels.

Rising Confidence in Digital Tools Among Small Businesses

It added that digital confidence among small businesses has improved significantly, with 87 percent of respondents stating they feel more confident using digital tools compared to the previous year, while 82 percent said they are comfortable using such tools for daily business operations.

Overall digital payment usage has also increased, with 80 percent of retailers reporting higher adoption of digital transactions over the past year, reported ANI.

Cash Still Remains Relevant in the Ecosystem

Cash, however, continues to remain an important part of the ecosystem. The survey noted that cash still accounts for 37 percent of the dominant transaction mix, while Aadhaar banking and UPI together account for 61 percent.

Among service categories, cash withdrawal emerged as the most widely used service at 51 percent, followed by Aadhaar banking at 22 percent and UPI transactions at 12 percent.

Early Adoption of AI Tools Among MSMEs

The report also highlighted early-stage adoption of artificial intelligence (AI) tools among MSMEs. While 90 percent of respondents said they were aware of AI in some form, 71 percent reported using AI tools to automate or improve business operations.

However, 26 percent of respondents said they were still unsure about which AI features could best support their business needs, indicating a gap between awareness and effective utilisation.

Despite this, digital tools are already showing measurable economic impact. According to the report, 41 percent of respondents said digital adoption has helped increase their income, while 37 percent said it has helped attract more customers.

MSMEs Transition Towards Consistent Digital Use

The findings suggest that MSMEs are gradually moving beyond initial digital adoption towards more consistent and confident use of technology in daily operations, strengthening their role in India’s broader digital economy.

The MSME Digital Index 2026 surveyed 10,000 retailers and small businesses, including kirana stores, customer service points, mobile recharge outlets and other neighbourhood enterprises across PayNearby’s network.

(KNN Bureau)