UPI and Aadhaar-enabled banking now account for 61% of transactions at semi-urban and rural MSME retail stores, according to PayNearby’s MSME Digital Index Report 2026. The report says digital tools are increasingly embedded in last-mile commerce, even as cash remains a major part of day-to-day business.
The report found that cash is still the single largest customer transaction mode at 37%, while cash withdrawal is the leading service at 51%. Aadhaar banking accounts for 22% of reported service usage, and UPI accounts for 12%, underscoring a mixed payment environment rather than a fully digital one.
The study also said 71% of semi-urban and rural MSME retailers use AI tools to improve daily business operations. That suggests digital adoption among smaller businesses is extending beyond payments into how retailers manage routine tasks.
PayNearby’s findings point to a wider shift in how MSMEs in smaller towns and rural areas are transacting, with formal digital channels gaining share alongside traditional cash-based activity. The report frames this as part of a broader transition in India’s retail ecosystem at the last mile.
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