According to PayNearby's MSME Digital Index Report 2026, UPI and Aadhaar-enabled banking account for 61% of transactions at semi-urban and rural MSME retail stores. While cash remains the single largest dominant customer transaction mode at 37%, the digital payment ecosystem shows significant growth. As reported by The Hindu BusinessLine, cash withdrawal emerged as the leading service at 51%, followed by Aadhaar banking at 22% and UPI at 12%. The report further indicates that 41% of respondents said digital tools have helped increase income, while 37% said they helped bring more customers. 92% respondents said digital tools have helped them support family needs or make better business decisions, indicating that digitisation is influencing how small retailers manage both their business and day-to-day financial responsibilities.
The report reveals that 71% of retailers use AI tools to automate and improve business operations, with 90% having heard of AI in some form. However, 26% remain unsure about which AI features could best support their businesses, indicating early-stage adoption challenges despite growing interest. As per the report, together these findings indicate that MSMEs are moving beyond first-time adoption towards more regular and confident use of digital platforms. The survey found that 72% of women respondents show interest in AI or automation tools, with 75% regularly helping customers use digital services. This shows that awareness of AI is higher than clarity on use cases, and adoption will depend on simple design, clear benefits, local language support and human assistance when needed.
The survey shows strong confidence in digital adoption among MSMEs, with 87% of respondents feeling more confident using digital tools than last year and 82% comfortable using them for daily business activities. Among women respondents known as Digital Naaris within the PayNearby ecosystem, 79% feel confident using digital tools for business and 90% are more confident than last year. 39% of Digital Naaris report higher income and 36% see more customers after digital adoption. The report indicates that MSMEs are moving beyond first-time adoption towards more regular and confident use of digital platforms, with this shift strengthening retailers' role in the MSME sphere.
The report shows a strong formal credit readiness signal, with 47% of respondents saying digital transaction records have already helped them access formal credit, and another 22% planning to use these records for exactly that purpose. 40% of respondents want to offer credit in the future, indicating that credit is emerging both as a funding need and a service opportunity at the last mile. Respondents are looking to expand their service offerings, with government services emerging as the top preference, followed by credit, education, insurance, healthcare, and e-commerce. Over the next year, their key priorities include increasing income, attracting more customers, expanding services, and strengthening business stability. The findings highlight the continued relevance of assisted banking and digital services at the last mile, with retailers serving as trusted access points for customers seeking support with everyday financial and digital needs.
Training continues to be a major enabler of deeper adoption, with short videos being the preferred format for 49% of respondents, followed by in-person training, phone support and WhatsApp tutorials. 61% choose phone calls as their preferred support channel, with human support still preferred over self-service options. Fear of fraud is a top concern for 33% of respondents, followed by lack of training at 30% and poor internet connectivity at 23%. This shows that MSME digitisation will depend not only on access to technology but also on reliable transactions, fraud awareness, training and quick support. 81% of respondents help customers understand or use digital services, showing that even as customers become more comfortable with digital tools, local support and handholding still matters.
The MSME Digital Index 2026 survey covered 10,000 retailers and MSMEs, including kirana stores, customer service points, mobile recharge outlets, digital service providers and other neighbourhood businesses. According to the report, the index tracks digital adoption, payment trends, business impact, customer support practices, trust barriers, AI readiness, training needs and future service expectations among retailers and Digital Naaris in PayNearby's network. The survey was conducted among 10,000 retailers and MSMEs, including kirana stores, customer service points, mobile recharge outlets, digital service providers, and other neighbourhood businesses. The findings reaffirm that Bharat's MSMEs are no longer just adopting digital tools, they are growing with them, becoming trusted pillars of their communities.
