 "Demonetisation: How note ban is spoiling start-ups' business")
India’s start-ups have seen a drop in their business in the past three weeks since the government’s move to demonetise high-value notes. But, they have also seen digital and card payments increasingly being used for their products and services.
“(In the) first three days, there was a lot of chaos. Subsequently there was a drop of 8-10% in average sales and almost 60% of cash on delivery (CoD) customers have moved to online payments,” said Mithun Sacheti, founder of Caratlane, the online jewellery portal in which the Tata group's Titan has a majority stake. “In the long run, it is a good sign for us. It is a dent on consumer psychology. While economic benefits of these kinds of moves may be higher, it can boomerang on the government and the economy as well. It would be hard to say what will happen going forward. CoDs for us have come down from 25% of overall transactions to 12-13%.”
Start-ups, which have a smaller revenue base and tighter cash flow, have seen business drop drastically soon after Prime Minister Narendra Modi announced the withdrawal of the old Rs 500 and Rs 1,000 notes. Since then, the government has taken measures to print new Rs 500 and Rs 2,000 notes and reached out to banks and ATMs to disperse these new notes. At the same time, customers are responding to the government’s push towards cashless payments through credit and debit cards, payment wallets and UPI in making digital payments for their purchases.
“As consumers come to terms with the change, there is a short-term impact on e-commerce transactions, given the leaning towards CoD as a preferred mode of payment, but in the longer term, we don’t foresee any material change in consumer spending,” said Ananth Narayanan, chief executive officer of Myntra and Jabong. “We have seen a 30% increase in digital payments since demonetisation was announced and we expect to see greater uptake of digital payments going forward.”
ClearTax.com, which works with small businesses, says these firms have been impacted since a lot of their purchasing was cash-based.
“But end consumers have embraced digital wallets and other means. So gradually small businesses may have to adopt digital means of transacting. Some businesses or professionals may be going through hardships if they have not reported their income,” Archit Gupta, founder and chief executive officer of ClearTax.com, said. “Those who have not filed tax returns in the past can do so for the previous two financial years — FY15 and FY16 — before March 31, 2017. There are other requirements as well, such as accounting and book-keeping requirements, which businesses must adhere to.”
Firms such as Paynear Solutions, the Hyderabad-based payment solutions provider, health care start-up iClinic and 91springboard, a New Delhi-based workspace and accelerator, see organisations adapting for digital solutions as they grow their business.
“Over 70% of transactions of start-ups were cash on delivery (CoD). With the temporary lag, they are being converted as digital payments. The cost of handling COD transactions is five times higher than the cost of handling online payments,” Prabhu Ram, managing director, Paynear Solutions, said. “The cost includes more manpower, cash pilferage, counterfeit notes and loss of interest due to late realisation in the bank accounts. The entire start-up ecosystem would be benefitted in a cashless economy.”
Dhruv Suyamprakasam, founder, iClinic, said the firm had seen nearly a threefold increase in patients using its platform. “Normally we get around 350 new patient registrations per day from India. After demonetisation, the surge has mounted to 943 patients on an average every day,” he said.