Facilitators of cashless transactions in unorganised retail supply chains with specific focus on Convenience (Kirana) Stores



Financial Inclusion in India has historically focused on a few core objectives such as providing institutional credit to small borrowers, creating an ecosystem by which financial products, services and literacy can be provided within the framework of the banking system, disbursing government cash benefits directly to the beneficiary through his/her bank account to promote financial inclusion and to curb leakages. In the recent years, financial inclusion drives have targeted opening of bank accounts, with banks and Banking Correspondents being incentivized based on the number of accounts opened. This has resulted in opening of large number of accounts; in many cases, individuals have multiple inoperative bank accounts because the individual did not incur any cost due to opening of a bank account.

While India now has a well‐established mobile communications infrastructure and a payment infrastructure, the use of cash for retail transactions in the Indian economy is still quite high. This imposes massive transaction costs on the economy and introduces inefficiencies typically associated with a high cash economy. Large parts of the population also do not have access to banking facilities. However, this scenario is changing with the advent of the "Jan Dhan Yojana" which aims to put a bank account within reach of most Indians, with debit cards in their pockets.

Kirana stores are an important part of the unorganized retail ecosystem by being present in rural and in urban areas, sometimes serving as the only local outlet for purchase of food and other items. Thus enormous benefits can accrue through making these transactions cashless.

Hence, it is important to gain an understanding of the cost of operations of a typical kirana store through a research study and develop a reference model around key financial and operational parameters that would enable kirana stores to transition from cash‐based to a cashless model. While kirana stores thrive on local entrepreneurship which has often been highlighted in the economic press, not much research has been done in this area from the perspective of moving towards a cashless economy and its positive impact on existing kirana business models.

This ongoing research study, funded by CDFI, is attempting to analyse the business model of a typical kirana store and study the potential financial impact of introduction of new payment systems and inventory tracking systems at the retail level, not only on the operations of the kirana stores, but also on upstream suppliers including manufacturers It is also investigating and will propose a new strategic architecture and business model involving other stakeholders such as banks, consumers, Government, manufacturers and distributors that could potentially reap the benefits of cashless micro‐transactions and digitization of retail operations at the kirana store.