The government of India has abolished Rs 500 and Rs 1000 notes that were in circulation, and these have stopped to be legal tender as of November 8 midnight. The move is aimed at curbing black money and corruption in the country with citizens having the option of going to a bank or post office to exchange these notes or deposit them in their bank account.
And while ordinary folks might suddenly find the Rs 500, Rs 1000 notes in their wallets worthless, for digital wallets, the announcement is nothing short of a party. If your auto-rickshaw guy has a ‘Paytm accepted here’ sticker, at least you have some means of getting by today. Paytm, which is the country’s largest digital wallet, said it all in this tweet, “We have got two words for you: Paytm Karo.” Paytm’s co-founder and CEO Vijay Shekar tweeted this on the move, “Keep the money digital. Superb step by our dear PM @narendramodi. From a bit inconvenience to incredible bold step !”
Digital wallet players are lauding the decision as they see this as an opportunity for growth. “This a strong step taken by the Modi government and will benefit the growth of digital payments and digital banking in India. We (MobiKwik) are excited to be a part of this historic moment,” said Bipin Preet Singh, CEO of MobiKwik.
According to Upasana Taku, Co-founder MobiKwik, the cash withdrawal and deposit limits will mean that “millions of Indians who never adopted digital payments are now scrambling to figure out how to use a mobile wallet or a debit card for daily life transactions.” She adds that it won’t be different for retailers who will have to give up their hesitation for card/wallet acceptance. Taku feels this change was long “overdue” and “will certainly boost our economy as a whole.”
“We welcome the Government’s bold and courageous move to weed out black money, which will have significant long term benefits for the economy. With this, the quantum of India’s economy moving through the digital pipes will witness massive growth. Both Snapdeal and FreeCharge are committed to supporting all such initiatives,” said Kunal Bahl, Co-founder & CEO Snapdeal.
For Digital wallet players, the announcement is seen as a boost to their months of efforts to encourage offline payments. Players like Paytm, and MobiKwik have integrated with IRCTC for payments. These players have also signed up with big retailers like Big Bazaar, etc. Mobikwik is now accepted at Croma, Pantaloons, Star Bazaar and others. Paytm had recently announced a tie-up with pharmacy chains 98.4 Degrees and Fortis Healthworld as well.
So if you were worried about offline stores, there are options that will go with digital wallets, but again these are mostly big-brand stores. The problem is that most local vendors, the shops close to your house are unlikely to accept the digital wallet, debit cards or credit card payments. Payment via digital means comes with the taxes, and a lot of vendors will tell you it will be 2 or 3 per cent extra if you are paying via card. In small towns, where big brand retail stores are missing, a payment via card is not always an option.
The other issue with rooting for digital wallets is that most have a limit of Rs 10,000 per month. A user will need to go eKYC verification in order to get the limit increased to Rs 1 lakh per month. KYC has been the big buzzword for the big players like Paytm and MobiKwik, but whether users will start signing up in droves now, is a little too soon to say. Let’s not forget, there are new Rs 500 and Rs 2000 notes coming back in circulation once normalcy is restored. So those who can afford to wait and manage mostly by cards, might just do so.
For digital wallet players, the problem is still that the main way of loading cash on the wallet is via a digital means like a debit card, net banking etc. Then there’s smartphone catch, the working internet connectivity. Most of India still doesn’t have all of this. Even those on 4G, 3G connections in the city face poor connectivity, which isn’t ideal in the middle of a transaction.
With the government suddenly pulling the plug on Rs 500, Rs 1000 notes, people who are not yet using digital means of payment, suddenly find themselves without any spare cash. And banks remain closed for today, which could add to problems.
While wallets are lauding this move for now, most common people might still prefer waiting for the spare cash.