Digital tools are increasingly being adopted by India's MSMEs, with UPI and Aadhaar-enabled banking making up 61% of transactions at semi-urban and rural MSME retail stores. Additionally, 71% of retailers are utilising AI tools to enhance daily business operations, according to PayNearby's MSME Digital Index Report 2026.
The report highlights that 87% of respondents feel more confident using digital tools compared to the previous year, and 82% are comfortable using them for daily business activities. This shift is evident in payment behaviour, with 80% reporting an increase in digital payment usage at their stores over the past year.
AI is becoming an area of interest among last-mile MSMEs, though its adoption is still in the early stages. The survey reveals that 90% of respondents have heard of AI in some form, and 71% have used AI tools to automate and improve business operations. However, 26% remain unsure about which AI features could best support their businesses.
While digital payments are gaining traction, India's transaction ecosystem remains a mix of cash and digital modes. Cash continues to be the largest customer transaction mode at 37%, while Aadhaar banking and UPI together account for 61% of the dominant transaction mix. Cash withdrawal emerged as the leading service at 51%, followed by Aadhaar banking at 22% and UPI at 12%.
The report indicates that 41% of respondents believe digital tools have helped increase income, while 37% said they have attracted more customers. This shift strengthens retailers' roles in the MSME sphere.
UPI and Aadhaar-enabled banking account for 61% of MSME transactions, with 71% of retailers using AI tools. 87% of respondents feel more confident using digital tools, and 82% are comfortable with them for daily business activities.
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Published on: Jun 23, 2026, 4:44 PM IST
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