Industry POV

BW Digital: Future Perfected By A Jolt?

07 Feb 2017

Demonetisation has changed consumer behaviour and that’s going to continue. Consumption patterns in FMCG, luxuries and hospitality have shown intriguing changes, and although many sellers/vendors talk of losses, many are armed with the patience to see this through

The wheels of digital india got moving some time last decade and picked up pace after the current regime took over. But in November this year, the wheels got some potent nitro boosters, and that too, overnight. The jury is out over the execution of the demonetisation plan, but the audacity of the idea has suddenly pushed millions of us into the age of digital payments.

I don’t want to rewind to the barter age to put this in perspective (although I’m sure many would have been outraged at replacing barter with pieces of paper!) but I believe we are at the interesting evolutionary juncture of replacing currency with digital cash. Take the more advanced economies such as the US or UK, for instance. In mid-2014, London’s buses completely banned cash, leading to knee-jerk fury. But two years down, the company reports of having saved £24 million in cash handling costs and the queues have shrunk. UK has since made big strides toward being cashless. Smaller countries, such as Finland and Sweden, are largely cashless, while Germany and Australia have ‘less cash’.

In India, the cultural and social hindrances of going cashless are many, but with five times more mobile phone owners than PAN card holders, the opportunities are vast. Smartphones and Internet connectivity are on a stupendous rise — with 43 per cent of India projected to be online by 2020, that’s massive infrastructure for the digital payment wave. 

The sheer simplicity of digital payments makes them a phenomenal idea. I began using PayTM thanks to Uber, as the feeling of walking out of a cab without worries of change was amazing. Today, the occasional habit has turned into a routine for workers, officers, vendors and students. For housewives who like stashing ‘safety’ money under beds or buy gold, digital wallets promise peace of mind!

The X-factor of digital payments being felt these days is peer-to-peer transactions. Punch in 10 digits of the payee’s phone number and shoot — small or large amounts transfer in a jiffy. On a macro level, retail traders and sellers benefit hugely from this. Remember, our ‘giant Indian middle-class’, which shops at Big Bazaar is a big economy driver. When organised trade gets a level playing field with unorganised trade, (the former does most of the advertising), expect a spurt in advertising and media spends too.

For banks, digital lending stands to gain, as keeping a track and sizing the borrower’s creditworthiness becomes smoother. E-wallets launched by dozens of banks are having sunny days in terms of sign-ups — great news for the tech and IT sector. And although the RBI didn’t lower the repo rate in its announcement on December 7, the base interest rates are likely to fall in the near term.

Demonetisation could be setting up a base for ‘block chain’ as a transacting system, allowing reduction of the cost of banking by as much as 90 per cent, making it more secure and instantaneous. The forced push towards digital money has made us aware just how much we may be losing by keeping cash. If an entrepreneur avoids depositing earnings to avoid income tax, he and the Indian economy lose out on interest and liquidity. Going digital will encourage small and medium entrepreneurs to influx more monies into the system, helping the nation grow. 

In the past month, demonetisation has changed consumer behaviour and that’s going to continue. Consumption patterns in FMCG, luxuries and hospitality have shown intriguing changes, and although many sellers/vendors talk of losses, many are armed with the patience to see this through. The ‘chalta hai’ attitude has been jolted to reality.

Disclaimer: The views expressed in the article above are those of the authors' and do not necessarily represent or reflect the views of this publishing house. Unless otherwise noted, the author is writing in his/her personal capacity. They are not intended and should not be thought to represent official ideas, attitudes, or policies of any agency or institution.

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