Whatever be the impact of demonetisation on the nation’s economy and black money, but that has clearly given a big boost to the Modi government’s cashless and digital agenda as more and more people are opening up to the convenience of digital payments. The growth rate of the digital payments industry, which was earlier in the range of 20-50%, has accelerated post demonetisation to 40-70%, according to industry sources.
Here we are taking a look at how demonetisation impacted India’s digital industry and the Modi government’s digital drive:
1. Demonetisation conveyed a strong psychological message to Indians that cash is not welcome and digitization of cash is inevitable. “This also resulted in doubling of the number of PoS machines in just one year, which was one of the weakest links prior to demonetization,” says Navin Surya, Chairman, Payments Council of India.
2. From an overall industry perspective, the last one year post demonetization has been very exciting. Competition has also been intensified with the entrance of many new Indian and foreign players. This will drive innovation which ultimately is good news for customers.
3. There has been concern that with the cash back into the system, the sustenance of digitizing payments has taken a hit. However, “we believe that structural reforms like GST has in fact given the much-needed boost to the digitization initiative. It will be difficult to make cash deals anymore with digital trails of every transaction now. While we haven’t seen any slowdown owing to cash in the system, we are sure that even if there is any lag or slowdown, it is just temporary,” says Dewang Neralla, MD & CEO, Atom Technologies.
4. Industry players believe that two major technological advancements which will drive the industry going ahead are Artificial Intelligence and Machine Learning. AI and ML will transform the overall generation of payment technologies right from analytics to on demand payment processing aside to changing the shopping behaviour. It will help study the consumer patterns to roll out better financial products for them.
5. Globally this is one of the most exciting times for fintech, especially payment processing. “My belief is that India would take the lead in leapfrogging the global community for payments technology, whether it is instant payments or anything else. We would see a lot of innovations emerging to solve problems at the granular level. This augurs really well for India,” says Neralla.
6. Post-demonetisation, the rhetoric has now changed from bank v/s non-bank or wallet v/s bank, with the industry witnessing an increased mind-share for its digital and cashless journey. “And the path ahead is Collaborative Innovation,” says Bhavik Vasa, Chief Growth Officer, EbixCash.
7. With demonetisation, every small shop owner now has got either a digital payment instrument or a Bharat QR code or a payment gateway solution and the same has been the case with every consumer who now knows that he needs to have a digital option as well. Industry players believe that this was round one where the inertia which was missing has been put in place and the infrastructure has been created and from here on the industry is going to witness an increased growth.
8. Every player in the industry has made multi-fold investments in the sector in the last one year in infrastructure, brand, marketing, and creating awareness.
9. Post-demonetisation, “we believe the top categories to drive the momentum have been bill payments and travel bookings with more and more spends being made in these sectors. Besides corporate disbursements is also a critical segment as transactions in this segment are rapidly moving to prepaid cards and other forms of digital mode,” says Vasa.
10. Industry players believe that although demonetisation was a turning point for the digital payments industry which witnessed a phenomenal growth, however, for further accelerating this growth momentum and moving towards a ‘Less Cash Economy’, both the government and the regulators need to continue the initiatives taken by them. “This will also put in place an appropriate mechanism which will make cash transactions more expensive. These critical steps can further drive our current industry growth of 10% transactions to 50% in the next 5 years,” says Surya.