Indian economy has, until November, been rather a dependant on cash. The paper notes are the part and parcel of the way Indian economy wishes to spend and save money. However, the sudden announcement of the demonetization of INR 500 and 1000 currency notes, has stirred a new wave in the adoption of the digital payments across the nation. The process of digitization in India will take less than 12 months to 18 months as compared to a period of 5 years to 8 years.
I expect that more than 200 million bank accounts that were opened in last 2 years and were idle will start seeing transactions. Further alternative payment methods like mobile wallets, cards have already seen a surge in transactions recently.
I believe the trend to ensue. Along with the inconvenience, demonetization has reiterated a certain disbelief and disregard in the entire concept of cash. Besides, a cashless economy is now being recognized, not as an inconvenience, but a nation’s drive towards increased GDP growth with lesser leakage as compared to the past.
Massive On-boarding drive!
Everyone involved in the wide customer and merchant spectrum is going to have to become part of the digital payments landscape in the industry. Several payment solution providers have been actively campaigning for the merchant on-boarding, while offering convenience and ease to the end users by promoting mobile wallets downloads. This should see a much faster decline in the current percentage of 70% of online shopping done by cash in the next 12 months to 18 months.
Besides, merchants are now more aware and informed to become part of the digital wave.Electronic Payment processing players like Telr enable online merchants to tap the population which has an online presence . This population is much larger than the online buying population. This is possible by enabling merchants to offer electronic payment methods while selling on facebook and other social media channels.
Surge in the Mobile Wallets Transactions
The mobile wallet transactions have had a huge impact in the field of services related to banking transactions, money transfers and value additions like mobile & DTH recharges, bill payments, ticketing and shopping. Several players raised question marks on the future of mobile wallets, especially after the recent introduction of UPI. However, the recent demonetization drive has leveled the playing field for the mobile wallets to bounce back and claim their share in the economy.
Several leading mobile wallets have enjoyed a remarkable surge in their business and daily transaction of more than 100% in the last few weeks of the announcement of the de-monetization.
Payment Banks to Receive a Boost
With a majority of hoarded cash finding its way back to banks, Payment Banks and other entities constituting the transaction landscape, stand a chance to be benefited by the same in the long run. Since the entire nation stands together in this fight against black money, we are looking at an improvement in the banking habits. By avoiding the traditional dependence on informal cash, creating a stronger financial and transactional history, would promote financial inclusion, making the under-privileged sections of the society bankable.
Debit Card Transactions on an Upswing
Although there have been over 697 million cards in the circulation, the usage of debit cards has been low in India. However, after the recent cash-crunch, users are being pushed to complete the transactions via debit cards. It will soon become a norm for users to ask if a swipe machine is available before checking into a restaurant. Besides, the plastic is increasingly replacing the paper; whether it is a bunch of friends going Dutch on an evening’s supper, e-commerce sales or other transactions.
While the opportunity introduced by demonetization for the innovative e-payment players can be appreciated, the changing times also call upon us to ensure each and every section of the economy is included under the digital drive. I am happy to see the financial literacy drive becoming the focus for Niti Aayog.More than 45% of the population is unbanked. While this transition to cashless economy takes place, innovation payment processing players like Telr , wallet companies like Paytm, Oxigen , Mobikwik will need to work with banks and regulators to enable them to broaden the spectrum of the service offering, Banks will have to reduce the costs of transactions. More Point of sale machines will have to be deployed very quickly. I would expect banks to issue more credit cards to encourage faster transition in consumer behavior. This will help the online offering to become more accessible to the diverse sections of society, that has been an intrinsic part of India.