CIO & LEADER-November 2017 (1)

Cover Story
So, it is much easier to conclude that demonetization had
had a big impact on driving debit card usage in PoS or using
them as a real payment instrument, rather than just withdrawing
cash.
Of course, in case of both credit card and debit card usage,
we have used the PoS usage only and not the ATM usage, as
ATM usage is for cash.
The impact on mobile wallets has been significant too.
Between August 2016 and August 2017, the monthly usage
of mobile wallets in terms of value grew by 236% as compared
to 152%, 198% and 174% annual growths in the previous
three years. It is a no-brainer than demonetization did
push up mobile wallet usage. But what is more important is
that unlike debit cards, the mobile wallet usage saw a more
permanent growth and even today is at a level that is significantly
higher than pre-demonetization months.
So, data suggests that mobile wallets gained immensely
from the demonetization move.
Prepaid cards actually saw a lower growth in monthly
value usage between August 2016 and August 2017. They
grew 120% in this period, as compared to growth of 143% and
278% in annual usage value in the previous two years.
In short, demonetization has had no impact on prepaid card
usage, not even during November to January, as the monthly
data reveals.
Let us finally look at the retail electronic clearing data,
which accounts for more than 90% of all retail electronic
transactions in terms of value. In fact, all the other four payment
methods we have examined here combined account for
just about 5% of retail electronic clearing like NEFT, IMPS
and ECS.
The analysis of retail electronic clearing data shows that the
monthly usage in terms of value grew 44% between August
2016 and August 2017, marginally higher than the 40%
growth witnessed in the annual usage in the previous year
(2015-16) and 38% growth witnessed in the year before that.
Demonetization has very little impact on driving the
growth of electronic bank payments.
So, what is the final conclusion?
The significant growth in debit card usage and mobile wallet
usage shows that demonetization did push up the usage
of electronic payment in the segments that use them. The
explosive growth in these two segments showcase that many
users who did not use electronic payments earlier came into
the ‘system’ and started using electronic payments.
To that extent, demonetization did democratize electronic
payment in India to a great extent—not a mean achievement.
However, did it turn India into a digital economy by significantly
pushing digital payments? The answer is a BIG
no. More than 90% of the payments are through banks like
NEFT, ECS and IMPS. That has not shown any major disruptive
impact from demonetization.
How does it matter?
But beyond demonetization, the big question is how the
future unfolds.
Non-cash transactions in India are likely to grow at a CAGR
of 26.2% between 2016 and 2020. Further, the Government
has an aggressive target of 25 billion non-cash transactions
for 2017–2018, with priority areas being mobile, government
benefits/subsidy transfers, and micropayments. That total
is expected to comprise 11 billion card systems transactions,
6 billion mobile transfers, and 8 billion online transfers. A
focus on contactless payments for public transport is the next
item on NPCI’s agenda to boost digital payments in India.
Beyond politics, why is this question—and its answers—
important for business?
The future strategy of most consumer businesses will
depend on how the digital payment scenario evolves.
Depth—more value transactions happening online—will
have a different implication than breadth—a wider base of
digital payers.
The implications for consumer businesses selling high
value, low volume items such as electronics, furniture etc.
will be different than the implications for low value, high vol-
November 2017 | CIO&LEADER
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