Demonitisation of Currency in India: What this means for Mobile Payments Industry

The Indian Government announced the demonetisation of  ₹1000 and ₹500 notes with effect from immediately, making these notes invalid in a major assault on black money, fake currency and corruption.

What this means is, all ₹500 / ₹1000 notes will have to be returned to the banks before 31st December. This way, everyone will be forced to convert their black money into white, and those who have been making fortune off black, will have a very hard time.

While this step is welcomed to curb the corruption menace in the country, the widespread alternative for medium to high value payments is a Debit Card / Credit Card. Recently, this method of payment has received a lot of traction due to NPCI’s RuPay Card and Government’s Jan Dhan Yojana. Though, these cards work with a Bank Account only.  It is obvious that this segment is bound to grow rapidly in the coming weeks, there is one more Industry waiting to erupt in the country.

Yes, I’m talking about Mobile Payments. India is not alien to this. Banks have been pushing Unified Payments Interface or UPI for months now, every bank has a on the go Mobile Service and you can seamlessly transfer money across accounts with a touch. Competing in this same space are solutions like PayTM, Citrus, FreeCharge, Oxigen ….. it’s a long list. But, these solutions work independent of your bank account. And honestly, have proven to be far more practical in day to day usage.

PayTM and FreeCharge have been pushing Mobile Payments since months. They’ve tied up with CCD, McDonalds, Uber, Petrol Pumps even Rickshawalas. But, the users response to this has been luke warm. People always preferred paying cash for these commodities. Now that Cash itself seems to be a hassle, for even transaction value of 500 or 700 rupees, people will now be more inclined to use these solutions in they’re day to day life. The day is not far when we’ll see cash as a redundant method of payment and prefer Mobile instead.

Paytm has over 100 million wallet users, which is double the penetration of Visa and Maestro combined (in India). According to a recent report by GrowthPraxis, the market for mobile-enabled payments in India grew more than fifteen times between 2012 and 2015 to reach its current size of $1.4bn (£979m). Currently, RBI rules limit digital wallets to Rs 10,000 without a KYC. With a full KYC, it can be extended to Rs 1 lakh. eKYC via Aadhaar too will help revolutionize this process.

This concept has taken a step ahead abroad in America and Europe by enabling mobile payments via Mobile NFC. You’re Cards and Account are kept digitally in your mobile, all you need to do is swipe or tap the phone on the Card Machine and you’re done. No need to carry a single card physically. Until now, very few companies have used this method in India. It won’t be surprising to see Apple Pay, Samsung Pay and Android Pay jump into the Indian market anytime soon.