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According to bankers, fintech companies and the Reserve Bank of India; while digital transactions spiked after the note ban, their numbers have since declined. Photo: HT
According to bankers, fintech companies and the Reserve Bank of India; while digital transactions spiked after the note ban, their numbers have since declined. Photo: HT

Moderation in digital money but drama elsewhere

The spike in digital transactions saw moderation post-demonetisation but the impact on many other aspects of our financial lives has been anything but moderate

Demonetisation has changed the way Delhi-based Rohit Koshy, 41, vice president at bike taxi service Baxi, transacts. Koshy used many non-cash options even before 8 November 2016. “I remember a day during demonetisation. I had to recharge my Metro card while I only had Rs20 in my wallet. I got to know I could do it online. I started doing everything electronically. I also prefer using UPI (Unified Payments Interface) for a lot of person-to-person transactions," he said.

Surprisingly, his cash transactions have increased after demonetisation. “Before demonetisation the transaction ratio was 80:20—80 being non-cash transactions. This peaked during demonetisation. However, the demonetisation exercise has left a fear—what if the same thing (cash crunch) happens again? So I end up withdrawing more cash than required and keeping with me. Hence, now the ratio is 50:50," said Koshy.

For Manishree Gupta, 31, team leader at a financial planning company, the shift was from cash to non-cash. “Wherever the plastic option was available, I used cards. Things got accentuated when demonetisation happened and cash was in short supply. For instance, our office canteen got Paytm and even for Rs5 transactions I started using electronic channels. From already 50% cashless, I moved to around 80% cashless," said Gupta.

These are but two of a billion stories out there on how demonetisation brought about a mindset shift in people’s approach to spending.

Fall in digital payments

According to bankers, fintech companies and the Reserve Bank of India; while digital transactions spiked after the note ban, their numbers have since declined. “If we were doing 100 transactions before demonetisation, that number went up to about 300 during demonetisation for the obvious reason that there was no cash," said Rajiv Anand, executive director, Axis Bank Ltd. “However, as compared to say the 100 number before demonetisation, now it is at 150-160. It has not gone back all the way to 100 despite the fact that cash is back in the system," he added. Data bears him out. The table ‘Booster dose’ shows how digital transactions rose and then fell post demonetisation.

What next

In the last 1 year, multiple payment platforms have been launched in the market, including UPI and Bharat QR (Quick Response). In the coming years, as a consumer, you can expect consolidation. “The problem today is not on the part of acceptance from the consumer side. The problem today is of plenty now. If you give too much choice to a customer, she will get confused. Not every customer is financially literate to understand all the products now. Rather than giving too many options to the customers, let us just pick up the best few products which are convenient for the consumer and are scalable. That would be the best way to go non-cash," said Manju Agarwal, deputy managing director of corporate strategy and new business, State Bank of India.

Demonetisation was a kind of booster dose for digitalizing transactions in banking. Normally we were witnessing a growth of say 30-35% in digital transaction sequentially. Demonetisation pushed it further. If I was doing X transactions, that number went up 4X to 5X. However, after December we started seeing a little bit of decline as cash transactions improved. Consolidation is the only way to increase digital transactions. UPI (Unified Payment Interface) and PoS (point of sale) machines will top the list for digital transactions- Manju Agarwal, deputy managing director of corporate strategy and new business, State Bank of India
We have seen a significant surge in UPI. Last month overall the system did about 30 million transactions on UPI. We ourselves have seen a significant surge in UPI transactions in October. We have done 11 million transaction on UPI. Majority of the UPI transaction are of person-to-person in nature. We notice that people use multiple payment options for different kinds of transactions- Rajiv Anand, executive director, Axis Bank Ltd
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