Black Money in India will soon say goodbye…What a surprise our Prime Minister Narendra Modi gave us!

Banned 500-rupee and 1,000-rupee notes after Tuesday midnight for the entire nation is such a bold move, I must say! Though some conditions provide relief for a few days (crematoriums, hospitals, petrol pumps, etc), the change is expected to be pushed through incredibly fast.

We are living in a country where 98% of consumer payments are still made in cash and about a quarter of the $2 trillion economy is unaccounted.

Impact of Banning Black Money in India

With the new cashless economy, here is how different areas will be impacted:

1. Increased Use of Mobile Wallets

With an aim to curb black money in India, PM Modi decided to ban 500 & 1000 rupee note. This gave a new hope to companies depending upon mobile wallets like PayTM, Jio Money, and MobiKwik. As of now, mobile wallets were accepted at quite a few places, this might become the next big thing.

2. Lesser COD (Cash on Delivery) Orders Now

This period of demonetization will help e-commerce websites to boom. This is because more and more people will be using their debit or credit cards and netbanking to conduct transactions.

The affect could be seen with Amazon, the e-commerce giant that has already disabled their cash on delivery payment option. All companies in majority have decided to reduce CoDs and improve margins over the long term.

‘There could a lot of returns over the next few days’ Hari Menon, Co-Founder & CEO, Bigbasket

This is because 50% of its consumers pay via cash.

3. Use of Debits Cards to Surge

More than 697 million debit cards are in circulation in India today. However, not all of them are in use. Majority used their debit cards only at ATM to withdraw cash. Now, you have to use these cards to make bigger transactions because not all of us a lot of Rs 100 notes!

4. Urgent Upgrade Needed for ATM Cash Management

RBI asked all the banks to ensure that ‘at least 10% of their ATMs dispense Rs. 100 notes’. More recently, they were directed to dispense smaller denominations as well. Now banks will be dispensing Rs 50 notes as well. Therefore, the cash management at ATMs needs a closer inspection.

5. UPI to be More Important

The Unified Payments Interface (UPI) will be even more important in the coming months. This implies NCPI or the National Payments Corporation of India needs to work faster in order to bring all of the banks on this payment platform.

6. Retail Stores Need More POS Terminals

POS terminal is a machine that accepts card payments in retail stores. With this decision of the Indian government, people will make use of their cards at retail stores. The number of cards are 697 million against the number of POS terminals in India i.e. 14 lacs. POS terminals need to drastically increase.

Boom in Digital Media

PM Narendra Modi’s decision of demonetization will impact the digital payment scenario. This will lead to a shift to digital payments and electronic transactions to make the economy digital and cashless.

Opportunities in Digital Media Due to 500 Rupee and 1000 Rupee Ban

There are various opportunities for digital companies to build plug-ins or products in the payments, HR and Vendor management space. The companies will be more transparent and digital is the easiest and frictionless option.

There is a pool of opportunities to partner with online payment brands like Chillr and PayTM. Since customers will transact cashlessly, they will definitely go online, and once they have got used to paying online, they are more likely to convert online via digital marketing.

Paytm will achieve its three-year targets within one year, Sharma told the Mint newspaper. Within hours of Modi’s announcement, Paytm saw a 1,000 percent surge in money added to the wallet, 200 percent increase in app downloads and 250 percent growth in transaction value.

This is the golden age to be a tech entrepreneur in India. Specially a fintech one. Keep the money digital. –  Vijay Shekhar Sharma, the founder of Paytm.

With more and more people moving into online payments, knowledgability of the digital medium will grow and we will responde better to digital marketing initiatives. One of the advantages is people will have email ids or accounts ready to use for online transactions.

What Industry Experts say about Modi’s Cash Ban Move

Bipin Preet Singh, CEO, MobiKwik

This mind-blowing initiative by Modi to curb black money will do down in democratic India’s history as more impactful than the 1990’s economic reforms. Within a 50-day period, a billion Indians will change their payments’ behaviour. It will benefit the growth of digital payments and digital banking in India. We are excited to be a part of this historic moment.

Millions of Indians who never adopted digital payments will now scramble to figure out mobile wallets and debit cards for daily life transactions.

Kumar Karpe, CEO, TechProcess Payment Services

This will give a huge push to cashless payment systems like online payments, mobile payments, Point of Sale terminals, etc. We are expecting a huge surge in digital payment volumes, and our systems are geared to process the expected volume surge in coming days.

Amrish Rau, CEO, PayU India

The move will lead to significant growth in digital payments. We will also see huge reduction in cash on delivery transactions.

Conclusion

Though the surprising announcement of PM Narendra Modi on banning 500 and 1000 currency notes was majorly targeted to eliminate the problem of black money in India, it has however, helped the Digital industry to surge.

What could be the other impacts of banning black money in India on Digital payments?

Image Credits: fonearena, timesofindia, twitter