Cashless times: For digital payments, a period of high growth

The largest incremental demand for e-modes of payment has come from outside the metros.

By: ENS Economic Bureau | Ambala/new Delhi | Published: December 8, 2016 4:22 am
demonetisation, demonetisation, demonetisation debates, cashless transactions, internet transactions, demonetisation effect, black money, Rs 500 Rs 1000 ban, india news, latest news, indian express However, the accelerated digital payments infrastructure, will highly depend on the country’s internet connectivity.

A look at the numbers arriving from different companies involved in digital payment business shows how the government’s announcement to discontinue the old high denomination currency notes from circulation has led to a surge in adoption of such platforms post November 8.

In its first two-day sale since the government’s announcement, Snapdeal reported that 75 per cent of the orders were placed using cashless payment modes such as wallets, debit & credit cards, or net-banking. This is indicative of a shift from the existing trend according to which cash-on-delivery option comprised nearly 70 per cent of transactions for e-commerce firms.

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“More than 90 per cent of the orders from smaller towns like Madehapura (Bihar), Tura (Meghalaya), Malapuram (Kerala), Ballia (Uttar Pradesh), Ambikapur (Chhattisgarh) were placed using cashless options,” Snapdeal said.

Mobile wallet firms such as Paytm, Oxigen, MobiKwik, FreeCharge, etc have also witnessed a surge in usage of their wallets and the money loaded into them post November 8. Within a day, Paytm witnessed an increase of 435 per cent in overall traffic on its platform. FreeCharge, a mobile wallet owned by e-commerce firm Snapdeal, also reported a sharp 12-fold rise in the average wallet balance loaded by its customers into their wallets.

According to these online payment platforms, the largest incremental demand for electronic modes of payment has been coming from outside the metros, from areas considered to be a low-penetration market for digital payment businesses.

MobiKwik also reported a 1,000 per cent increase in adoption of its wallets in Tier-II and Tier-III cities. MobiKwik co-founder Upasana Taku said that from a local cycle shop to a cane juice seller to a temple, people have “started adopting” digital payment platforms in the wake of the ban on high-denomination notes. “Earlier, these sellers did not feel the need to use a mobile wallet but now they receive us well.”

This is also representative of a large number of transactions in the unorganised sector, which hitherto went unaccounted, coming to the mainstream.

Phrases such as “war-footing” and “mission-mode” have been used on several instances by government officials and ministers to demonstrate the sense in which it was working towards giving a fillip to the digital payments ecosystem since its announcement to discontinue high denomination notes representing 86 per cent of the currency in value terms.

Even as a number of policies and tools were already present to encourage digital mode for making payments, the November 8 announcement became a key driver to boost the cashless system. “The fact is that we have had a shock given to the currency system and, in my view, this will boost digital economy,” former chairman of the Unique Identification Authority of India (UIDAI) Nandan Nilekani had recently said.

However, the accelerated digital payments infrastructure, will highly depend on the country’s internet connectivity, a point raised by chairman of the Telecom Regulatory Authority of India R.S. Sharma. He recently had said that the one area which needed “a lot of work” was broadband connectivity.

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