A roller coaster ride after demonetisation: From digital to less cash

A half-torn poster of Paytm Wallet with the first four digits of Ashok Mondol’s mobile phone pasted on the side of his grocery shop in Chittaranjan Park, a South Delhi residential colony, is the only evidence left of him ever accepting digital money. Till November last year, Mondol used his smartphone mostly to watch films. But, after the note ban, for some period, it became the main tool that kept his shop afloat.

“Mobile wallets became my shop’s lifeline. I could finally run my business,” he said. However, his digital journey ended soon enough. “Cash came back to the market. Also mobile wallets have a limit to the money that can be transacted on the platform and they charge service fees, making it unviable in a low-margin business,” he said. 

The first thing that people read on the morning of November 9, 2016, was full-page jacket advertisements in leading dailies by mobile wallet major Paytm. FreeCharge followed a day later and thanked the PM for the revolutionary step. Digital money in the country had finally got the ultimate push, thanks to a little known word till then, demonetisation.

What the numbers say

During the subsequent months, six new mobile wallets were launched, Axis Bank bought FreeCharge and Bajaj Finance took an 11 per cent stake in MobiKwik for Rs 225 crore, both hoping to make their digital play stronger. The industry together put in close to a billion dollars to find, educate and add more users. 

The government on its part tried everything to make India ‘less cash’. In the last one year, the government organised events such as ‘Digi-Dhan Mela’ hosted by the PM, launched digital ways of transaction including apps such as BHIM, Unstructured Supplementary Service Data, Bharat QR, Aadhaar Pay and even a television channel ‘DigiShala’ to educate people on the virtues of cashless transactions.

While year-on-year growth in digital transactions spiked in the immediate months after November 2016, the growth rate of both, value and volume of transactions, has gone back to pre-demonetisation levels. Though there are spikes in digital transactions, it has not been able to beat the high it witnessed in March this year of Rs 1.495 lakh crore. Experts believe that the government took more on its plate than it could handle.

GST elbows out ‘less-cash’ initiative

On July 1, the government rolled out the goods and services tax (GST), the biggest indirect tax reform in the country. Since then, digitisation of cash has taken a back seat, experts believe.

“There were a series of things that happened late last year. A significant plan for digitisation, fresh set of prepaid payment instrument guidelines, the Wattal Committee recommendations — all led to the biggest shift in digitisation of money, which resulted in a spike in digital transactions. But a lot more could have been done. After the government started struggling with the GST roll-out, the digital money initiative took a back seat,” Prosanto Roy, vice-president, Nasscom, said.

Industry stays bullish

In the weeks following demonetisation, Paytm saw its user base go up from 125 million to 280 million. Others have similar stories to tell and numbers to prove that digital money is thriving. 

“We have not seen any drop in the number of digital transactions. People who used e-wallets during demonetisation for the first time tasted blood and now we have 10 million small retailers online. Every other year, we hear that wallets are dead, but is that really the case?’’ asks Upasana Taku, co-founder, MobiKwik. 

Industry experts believe that for the digital and less-cash initiative to be a success story, the Centre needs to shift its focus. “The government needs to decrease friction in digital transactions. There should be parity in what one pays online and offline,” said Roy.