On 8 November 2016 when demonetisation was announced, nobody knew what was in store. A lot has changed since then. Experts told Mint how our money life has changed over the last year.
Shanti Ekambaram, president-consumer banking, Kotak Mahindra Bank Ltd
During demonetisation, cash had gone out of the system. Digital transactions spiked because that was the only (option). The real uptick was in debit and credit card transactions. From March 2017, cash started coming into the system and in the last three months it is back to business as usual in the business to customer segment. People moved to debit and credit card transactions using mobile apps and net banking and hence there was a big spike. But now that is history. I think credit card has continued to see an increase. Even people who didn’t have credit card started opting for it. Government brought platform changes in the form of UPI (Unified Payments Interface) and Bharat QR (quick response) code. Year-on-year, transactions have since increased in both types of payments options. From customer behaviour, they are using all mediums. Over the next 1 year, digital adoption will continue to increase. We have to help customers adopt, which we as a bank continue to do. There are multiple digital payment options available right now. It is difficult to say which one will work in the long run. Many expected card payments to dwindle, but we are not seeing that. It is difficult to say what will happen in the next 3-5 years in the digital transaction space. It is not just what the individual does but also what the merchant infrastructure is going to be.
Radha Rama Dorai, MD–ATM and allied services, FIS
Demonetisation was a mammoth exercise, for the ATM industry too. Things steadied by June once cash came into the system. The push towards digital transactions has nudged banks to rethink their ATM strategy. All started looking at driving down costs. It also led to the introduction of cash recyclers. The 7-8 year old ATMs started getting replaced by cash-recyclers. While the cost of maintaining recyclers and ATMs is more or less similar, with recyclers banks can ask customers who crowded the branches to go to the recyclers and deposit cash. Banks also started looking at new services on ATMs such as cross-selling of loans, e-receipts being issued for ATM transactions and money transfers. Very soon, you will see a lot of new services being introduced on ATMs. The ATM industry has become more resilient and has formed an association. There has been a short-term drop in ATM deployment. Banks are shutting down their ATMs and in fact relocating them. A small blip in numbers that you may have seen will go up in days to come. The number of ATMs in December last year was around 2,32,000. As on September this year, that number is up to 2,37,000. There has been an increase of about 5,000 ATMs in this period. ATM transaction value has also increased. Per transaction ticket size has gone up from Rs2,900 per transaction in September 2016 to Rs3,300 now.
Amrish Rau, CEO, PayU India
Demonetisation provided awareness for consumers. I think the greatest barrier for digital payments has been around consumers making their first transaction. Another deterrent is that business did not appreciate or promote digital payment acceptance.
Demonetisation forced consumers to use some digital payment transaction mode and made businesses see it as a very important channel to complete their check out. Earlier consumers were not readily paying through electronic channels and showed resistance. There are currently multiple options for payment transactions. I think consumers are really confused.
The largest growth due to demonetisation has been for cards and UPI. E-wallets haven’t enjoyed the growth associated with digital payment industry. We find that the digital payment benefit has gone to card payments. Since consumers have now started considering online payment as way of life, a lot of periphery fintech products have come into existence. In fact, person-to-person money movement has taken off very well.
What has also taken off is credit business. A whole host of fintech companies have entered on the online side for consumers and small and medium enterprises. Most of the fintech companies are now thinking of a consumer payments play and not just an e-wallet play. Fintech companies want to own the consumers and want to sell them products.
Nisreen Mamaji, CFP & founder, Moneyworks Financial Advisors
It has been a political move rather than an economic one. The GDP has taken a hit of 1.5%. The informal economy, which accounts for 45-50% of output in India and employs around 85% of the workforce—which transacts entirely in cash—was the hardest hit.
As per RBI data, there has been a visible channelizing of money towards financial assets like insurance and mutual funds. Booming equity markets and fall in interest rates and gold prices also helped in making this shift. Assets under management of mutual funds, as on 30 September 2017, stood at ₹Rs20.40 trillion. Premium mobilization registered a year-on-year growth of 17.4%, as on June 2017. eKYC, e-wallets and UPI have been game changers for the financial services industry largely due to ease of operations. On-boarding clients for mutual funds has become much simpler due to platforms such as BSE Star and NSE NMF. The forced shift towards financial savings and away from physical savings such as real estate and gold has led the investor to recognize the importance and impact of mutual funds as a long-term wealth creator. First, saving and spending as per your priorities is essential. Therefore, there is an enforced discipline. Second, holding cash in hand or idle in savings accounts will not beat inflation or help you to meet your goals. Last, use technology effectively to invest and keep track of your money wisely.