As MSME Day Approaches, Tech Transformation Now Visible On Ground

The Micro, Small, and Medium Enterprises (MSME) Day is on June 27. Often stereotyped as an underserved rural setting, the MSME landscape is going through a deep transformation, courtesy a reliable digital payments infrastructure. Also, there are a bunch of other tech-driven solutions such as credit access, payment management, inventory management, and more – serving the MSMEs. 

And data suggests Bharat’s SMEs are now moving from digital transformation to digital confidence. 

First up is the fourth edition of the MSME Digital Index Report 2026 released by PayNearby. It reveals that India’s smaller retailers and businesses in rural and semi-urban areas are now extensively focusing on digital tools. 

The report, which surveyed 10,000 retailers and MSMEs which includes kirana (grocery) stores, customer service points, mobile recharge outlets, digital service providers, and neighbourhood businesses across its network, notes that 82% of respondents are now more confident in using digital tools for daily business-related tasks. Nearly 87% of respondents said their confidence in these digital tools has grown since the last year. 

The change in behaviour also reflects in the transition in how they accept payments. For instance, 80% of respondents said that they have begun using digital payments at the stores more than last year. Though cash still remains a large mode of payment, it’s facing a close competition from alternative payment options such as the UPI and Aadhaar banking. 

According to the report, Aadhaar and UPI together accounted for over 60% of transaction mix in these rural and semi-urban areas. 

The report also notes: “Cash withdrawal emerged as the leading service at 51%, followed by Aadhaar banking at 22% and UPI at 12%. 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.

The business impact of digital tools is also becoming more visible. Around 41% respondents said digital tools have helped increase income, while 37% said they helped bring more customers. Faster service, improved customer trust, increased sales and the ability to offer more services were also cited as key benefits. Importantly, 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.”

Vineet Sethi, Chief Growth and Marketing Officer, PayU said in a statement, “MSMEs are not just a segment of India’s economy, they are its engine. Contributing over 30% to GDP, nearly 50% to exports and a third of manufacturing output, their growth is India’s growth. And as their ambitions grow, so does the opportunity to give them the tools — seamless payments, access to credit, reliable financial infrastructure — they need to fly even higher.”

“… Beyond financial tools, we are equally invested in the broader growth of this community — through programmes like inFINity that offer mentorship, capital and ecosystem access to businesses looking to scale. When all of this comes together within one ecosystem, we are not just enabling transactions; we are enabling businesses to formalise, grow and compete with confidence. India’s digital economy is growing rapidly, but its full potential depends on how many MSMEs we bring into this one ecosystem; not just at the checkout, but across the entire arc of their financial journey.”

AI & Automation: Bharat SMEs

AI can help Bharat’s MSMEs overcome some of their biggest constraints by reducing the cost of expertise. Tasks that once required accountants, consultants, translators, or market analysts can increasingly be supported through AI-powered tools for compliance, bookkeeping, customer engagement, and access to finance. 

“However, the next phase of digital inclusion is not simply about getting more businesses online; it is about ensuring that digital tools reflect Indian realities. India has a unique opportunity to build AI systems grounded in its own languages, consumer behaviour, and business ecosystems, making technology more accessible and relevant for small enterprises. The biggest bottleneck today is confidence; many MSMEs do not yet see digital tools as designed for them, making trust and local relevance just as important as technological innovation,” Alisha Butala, Policy Researcher and Founder at Mitti & Machine, tells Entrepreneur India.

ALSO READ: MSMEs 2.0: How AI Can Help Standardizing Small Business Lending

Butala’s sentiments also echo the recent nationwide survey conducted by the India SME Forum (ISF). The survey reveals there is an accelerated shift towards technology driven business models. It also noted that software automation, digital tools and AI are emerging as key drivers of competitiveness and productivity

Vinod Kumar, President, India SME Forum, stated: “Indian MSMEs are steadily transitioning toward technology-driven business models. Digital and software automation is becoming essential for competitiveness, while AI and affordable hardware automation will define the next phase of MSME growth and productivity.”

The findings suggest that MSMEs now view technology not merely as a support function but as a

strategic business enabler capable of improving profitability, compliance management and customer engagement. 

Manufacturing MSMEs are increasingly investing in digital monitoring systems, production planning software and machine-performance analytics to improve operational efficiency. The survey suggests that the convergence of software automation, AI and affordable industrial technologies could significantly enhance competitiveness among Indian manufacturers, particularly those participating in global supply chains.

At the same time, the rapid growth of e-commerce, social commerce and digital marketplaces has pushed businesses to invest in digital infrastructure to reach customers beyond their traditional geographic markets.

Pei-Fu Hsieh, Co-Founder and CEO, AiAccountant tells Entrepreneur India, that AI can help Bharat’s MSMEs build digital confidence by removing the complexity of managing finances. Instead of requiring business owners to learn accounting, tax, or compliance processes, AI can automate bookkeeping, provide real-time financial visibility, and deliver actionable insights in simple language. 

“The biggest bottlenecks today are fragmented financial data, lack of accounting expertise, and the perception that digital tools are difficult to adopt. To drive true digital and financial inclusion, technology must become invisible—business owners should be able to focus on running their business while AI handles the financial operations in the background,” he added.