You can be on Entrepreneur’s cover!

How Has Digital Payment Ecosystem Changed Since Demonetisation While demonetisation acted as a catalyst for the electronic payment ecosystem, it has not reduced cash usage

By Shipra Singh

You're reading Entrepreneur India, an international franchise of Entrepreneur Media.

Shutterstock

On 8 November 2016, exactly three years ago from today, the Indian government announced the momentous "demonetisation' of all INR 500 and INR 1,000 currency notes. The reasons cited by Prime Minister Narendra Modi back then included curbing black money, elimination of fake currency and reducing cash circulation in the economy as it is directly related to corruption in India.

Three years later, the Reserve Bank of India (RBI) data shows that electronic transactions through debit cards, mobile wallets and Unified Payment Interface (UPI) have more than tripled from what it was before demonetisation.

On the third anniversary of demonetisation, we tell you how the note ban has brought about a change in the country's digital payments ecosystem.

Push to Digital Payments

RBI data shows a spurt in digital transactions immediately after demonetisation. Transactions through debit card at point of sale (POS) terminals and m-wallets increased by 134% and 163%, respectively, between October 2016 and December 2016.

Debit Card Swipes at Point of Sale (POS) Terminals

Of course, the reason for this jump was that people had no other choice for transactions as they struggled with long queues at ATMs and the restrictions placed by RBI on withdrawal limit.

Debit card transactions increased by nearly 109 per cent in financial year 2017, whereas mobile wallet transactions saw an increase of 166 per cent during the same time, as per RBI data. However, year-on-year growth of both digital payment mediums has narrowed down over the years. Until August 2019, both debit card and m-wallet transactions grew by nearly 33 per cent in the last year.

Mobile Wallet Transactions

Though debit card and m-wallet transaction volume has tapered, UPI, which facilitates e-payments directly from the bank account, has witnessed phenomenal growth in the last three years.

UPI Transactions

Decline in card and mobile payments growth can be attributed to growing popularity of UPI. In October this year, UPI transactions hit the one billion mark, in less than three years since its inception.

Currency Circulation Back as Before

While demonetisation acted as a catalyst for people to embrace electronic payment ecosystem, it has not reduced cash usage, as was the objective for demonetisation.

This can be seen in the jump of 19.14 per cent in the total currency in circulation from November 2016 to March 2019, as per RBI annual report.

Shipra Singh

Entrepreneur Staff

Freelance Journalist

Side Hustle

This Insurance Agent Started a Side Hustle Inspired By Nostalgia for His Home State — Now It Earns Nearly $40,000 a Month

After moving to New York City, Danny Trejo started a business to stay in touch with his roots — literally.

Innovation

How Corporate 'Intrapreneurs' Can Harness the Power of AI to Transform Their Businesses and Supercharge Their Careers

Corporate intrapreneurs are uniquely positioned to lead the charge in harnessing the transformative power of artificial intelligence within their organizations. Here is how and why.

Growing a Business

Stanford Professors On the Counterintuitive Strategy That Helps Google Hire Top Talent

We assume that the best processes are seamless, but a little friction can go a long way.

Growing a Business

24 Hours After a Grueling Session of Pickleball, He Invented Something That Makes Most People Better at the Addictive Sport

Veloz founder, president and CEO Mitch Junkins discusses the creation process behind his revolutionary paddle and shares his advice for other inventors hoping to make an overhead smash in their industry.

Leadership

Employees Are Burning Out — and the Culprit Isn't What You Think

There's a type of stress that has a huge impact on employees' health, work performance and personal lives. Here's what it is and what you can do to combat it, both for yourself and your employees.

Business News

Elon Musk Says AI Technology Will Be Smarter Than 'Any Human' By 'Next Year'

The billionaire spoke about the rapid advancement of the technology in a livestream interview on X.