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Mobile-based payments gained sudden popularity within days after India’s decision to demonetize high-value currency notes in 2016. The transaction patterns in the following months are the subject of a new research, which has found that using mobile money can protect companies as well as families against economic shocks.

In a working paper for the International Monetary Fund, researchers Manasa Patnam and Weijia Yao study transactions on mobile wallet firm Paytm and link them with economic conditions. Satellite data on night-lights and government workforce estimates serve as proxies for economic activity, and rainfall data are considered as an indicator of economic shocks.

To assess the impact of mobile payments on sales and resilience to economic shocks, the authors survey 3,046 firms that were incentivised by Paytm to adopt its app at different times.

Using district-level data from May 2016 to April 2019, the study finds that the adverse economic impact of rainfall shocks was lower in districts that used mobile money more. A 10% rise in the use of mobile money reduced this impact by 3.8%, mainly in rural households.

Despite the higher adoption of mobile phones among the youth and in urban areas, the study notes a greater uptake of mobile money among the unemployed and the unbanked. Based on intensity of use, the authors find that districts with more informal sector firms could be linked with higher adoption of mobile money.

Firms that adopted mobile payments due to Paytm’s incentives showed a 26% improvement in sales after six months relative to other firms. The authors’ survey also finds that firms using Paytm felt lower uncertainty about future sales.

Overall, the use of mobile money potentially reduced the uncertainty both for households and companies, the authors conclude.

Also read: The Real Effects of Mobile Money: Evidence from a Large Scale Fintech Expansion

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