advertisement
Demonetisation came at the right time for Ridlr. The local transit app had just started selling public transport tickets. As a cash crunch followed the note ban, transactions spiked.
A year later, the app has close to 500,000 users, sells 1.5 lakh daily trips through 30,000 transactions.
Ridlr wasn’t alone. Digital transactions surged after Prime Minister Narendra Modi invalidated Rs 500 and Rs 1,000 bills last November. The biggest gainers were prepaid wallets like Patym and Unified Payment Interface-enabled apps as people used them for everything from paying utility bills to buying groceries and even a rickshaw ride.
That’s only part of the picture though. The initial spike came as 86 percent of the currency was withdrawn. As cash returned, volumes declined and traditional digital payment modes like card payments and National Electronic Funds Transfers have fallen back to their historic pace of growth.
It’s the new-age platforms and startups that are growing faster, though slower than the initial surge. Cash withdrawals at ATMs are nearly back to pre-demonetisation levels.
The market is crowded with multiple payment options from Paytm and the National Payments Corporation of India’s UPI and BHIM app to Google’s Tez, Aadhaar Pay and Bharat QR (Quick Response code). The central bank granted licences to 13 new digital entities in the past year. Fifteen startups were founded in 2017 and investments in fintech companies surged 600 times to 1.4 billion dollars over 2016, according to startup researcher Tracxn.
BloombergQuint looks at how popular payment modes fared since demonetisation.
Mobile wallets like Paytm and other prepaid instruments were among the biggest beneficiaries. Prepaid transaction volumes more than doubled since demonetisation and value is up over 70 percent, according to data from the Reserve Bank of India.
Paytm’s user base jumped almost two-fold to 27 crore during the period. Its smaller rival Mobikwik gained as well with the number of subscribers growing two-fold to 6.5 crore.
For Paytm, 60 percent of the adoption has come from tier 2 and 3 towns, and most of the users are active, he said. The mobile wallet has added close to 42 lakh merchants on its platform in the last one year, he said.
Another offering that has seen volumes surge is the National Payments Corporation of India’s Unified Payments Interface, which allows mobile payments and fund transfers across banks. Mostly used for low-value payments, UPI volumes jumped from 3.3 lakh to 7.7 crore transactions a month, RBI data shows. Monthly value surged from Rs 90 crore after the cash ban to about Rs 7,000 crore now.
Payments through Immediate Payment Service or IMPS, which includes UPI and the BHIM app, rose 89 percent during the period.
Card payments rose immediately after the note ban but the growth has since eased. Debit card transactions through payment terminals went up threefold percent immediately after 8 November, said Rajiv Anand, executive director at Axis Bank.
“If we were doing 100 transactions before that, the number went up to about 300. It has since come down to 180.”
Without demonetisation, that growth would have come in three years, he said.
So, cash is still the king in the Indian economy, said Anand.
The National Electronic Funds Transfer through bank accounts, largely used by individuals, rose almost 31 percent since October. The 42 percent jump in the year to August is around its historical pace of growth.
The real winners of demonetisation are new-age platforms.
The growth has sobered for Ridlr as well. It’s transactions are up two-fold and the startup has added UPI as a mode of payment, Vaghani said. “Yet, demonetisation definitely provided a push. We expect to maintain the momentum and expand the ticketing business to Delhi.”
(This article was originally published on BloombergQuint.)
(At The Quint, we question everything. Play an active role in shaping our journalism by becoming a member today.)