Digital payment companies are gaining the most with the demonetisation move. They favour Prime Minister Narendra Modi’s move to ban high value currency notes as it fundamentally addresses the underlying ‘cash engine’ that drives the shadow economy. The PM’s action is a critical step in positioning India as a leader in creating a cashless and digital economy. Currently, there are only 1.4 million point of sale (PoS) terminals across the country to serve over 750 million Indian consumers who have debit/credit cards. Only 3.5 per cent of all retail outlets in the country accept these cards with near zero penetration in the mass retail segment, which makes up more than 90 per cent of all retail in India. Digital payment companies are on a mission to democratise payments and empower even the smallest merchants to be able to accept credit and debit card payments from their customers. Adding to this, the Reserve Bank of India on Wednesday increased limit of prepaid payments from Rs 10,000 to Rs 20,000 to benefit consumers, self-employed and micro entrepreneurs such as vegetable and grocery vendors, and mechanics. Consumers can do day-to-day small transactions using their prepaid wallets. Small self-employed merchants would be able to receive digital currency without deploying physical terminals or PoS devices. Not just smartphones, going by what Economic Affairs Secretary Shaktikanta Das said, feature phones that account for two-thirds of mobile users in the country, can also be used to make future transactions.
One of the fall outs of the demonetisation decision had been the lack of cash to facilitate trade. While companies such as NumberMall are bridging the gap between manufacturers and retailers, BeatRoute, a mobile app platform is facilitating last-mile retail between packaged goods companies and distributors and neighbourhood stores. Airtel Bank recently became the first payments bank in the country to go live making it possible for a wide network of merchants to accept digital payments from the bank, offering customers cashless purchase of goods and services via their mobile phones. Paytm too updated its app to launch India’s first app PoS allowing small and medium merchants to accept card payments including Rupay, Visa, MasterCard and Maestro. State Bank of India, the largest public sector bank, launched ‘SBI Pay’, a payment solution app meant not only for its account holders, but also for customers of all other banks to send and receive money from their smartphones with a virtual payment address acting as unique identifier. It plans to add merchant payments and enhanced transaction limits in future. The demonetisation move may have created chaos, but it is only going to better the flow of physical cash within the economy, while driving the digital mandate. The bold alteration will mark a major cultural, fundamental and behavioural shift in consumer’s mindset.