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Unlocking the digitisation potential of North East India

How the eight sister states take on the journey of merchant acceptance

A true frontier region, North East India commonly known as the Eight Sister states comprises Arunachal Pradesh, Assam, Meghalaya, Nagaland, Mizoram, Tripura, Manipur, and Sikkim. Home to over 200 tribes, the North East region (NER) is linguistically and culturally distinct.

To accelerate NER’s economic growth, the Ministry of Electronics and Information Technology, Government of India launched the ‘Digital North East Vision 2022’ initiative to bring to light the opportunities for growth; and design a framework to strategize and implement programmes in order to digitally empower each of the states in the North East. Besides building digital infrastructure and empowering citizens with knowledge, promoting digital payments has been outlined as a critical thrust area.

Since the launch of the initiative, remarkable progress has been witnessed in terms of digital acceptance. UPI has now become the most popular mode of payment and 58%* of the total 15 lakh merchants in the region have been digitized. In this month’s Pulse insight, we look at the drivers, use cases and impact of PhonePe’s merchant digitization efforts in the NER.

Ecosystem Drivers for Digital Payments in the NER

Merchants, be it owners of grocery stores, restaurants, neighbourhood kirana stores, apparel stores, or chemists, are increasingly adopting newer technologies for ease of payment to further their businesses. The key factors that have accelerated adoption in the NER are:
  1. Smartphone access*: 47% people in the NER own smartphones, only 1% less than the national average of 48% - creating a solid foundation for any digitisation efforts in the North East
  2. Internet subscription & penetration*: The internet subscription rate in the region is 43% against the 55% average in the country. Internet penetration is higher in Assam at 38% when compared to states such as Bihar which stands at 30% penetration indicating that with the right push, NER can scale new heights of digitisation.
  3. Bank account linkage*: On an average 86% bank accounts are linked with a mobile number in the NER. The states - Manipur(91.4%), Mizoram(92.1%), Nagaland(94.7%), and Sikkim (92.7%) even cross the 90% mark offering an opportunity to develop strategic payment digitisation measures to realise the ₹130,000 crore retail digitization potential of the region.

Use cases of digital payments in the NER

The PhonePe Pulse data throws light on the varied use case of digital payments in the NER. The transaction split in the graph below shows P2P (peer to peer transfers) as the largest category followed by merchant payments which include payments made online as well as offline.

Category wise Transaction Split

Category wise Transaction Split

Increased Merchant Acquisition in NER

Although digitisation of offline stores is still comparatively low in North-East states, there has been tremendous growth in recent years. Retail and shopping is the most popular category among merchants in the region and over 68 thousand merchants falling in this category have been digitized.

PhonePe’s consistent efforts to educate, engage and empower merchants have led to phenomenal network growth. PhonePe is accepted as a payment option across the toughest terrains of NER including far-flung towns such as the Changlang district in Arunachal Pradesh. Assam witnessed the fastest adoption with 2.5+ lakh merchants in 2022 compared to just 10,000 merchants in 2020, followed by Tripura, Meghalaya, Arunachal Pradesh, Nagaland, Sikkim, and Mizoram.

Along with the acquisition rate, the transactions - both online and offline - have also seen a significant rise from 52 thousand transactions in Q1 2018 to 2+ crore transactions in Q1 this year, as seen in the graph below.

Quarterly Merchant Transactions Trend - North East

Quarterly Merchant Transactions Trend

PhonePe furthering the agenda of a digital future for the North East

As the PhonePe Pulse data indicates, there is tremendous headroom for the growth of digital payments in the North-East Region. Efforts like enabling rapid merchant acceptance and increasing consumer awareness, are a few measures being actively addressed by the Government of India and fintech players like PhonePe. With the objective to build simple, scalable, and innovative solutions making digital payments for all Indians a reality, PhonePe will continue its efforts in bringing NER into the fold of digital financial inclusion.