Indians skipping plastic money, leapfrogging to mobile wallets

Unlike the West, Japan and China, which slowly graduated from landline to cordless to cellular telephony and from cash to plastic to mobile payments mode, India has virtually skipped the intermediate stages — cordless telephones and plastic money — of this technological revolution and jumped into cellular telephony and digital banking transaction.

With Prime Minister Narendra Modi announcing on November 8 India’s first major ‘currency vasectomy’, and amid the resultant cash squeeze coming as a disruptive step to fast-forward the country into a breakaway economy, as many as the 23.3 crore unbanked people, out of the 38 crore smartphone users, are skipping the plastic money stage altogether and embarking directly into digital transactional stage, Abhijeet Vijayvergiya, Vice-President and Country Head-India, Capillary Technologies, an omni-channel customer engagement and commerce platform, told BusinessLine .

No wonder, Nandan Nilekani, one of India’s most famous IT czars and creator of Aadhaar cards, while supporting demonetisation of ₹1,000 and ₹500 currency notes, said digital transactions will escalate in the next three to six months to a rate that would otherwise have taken three to six years.

Any “short-term contraction” in economic growth will be compensated for very quickly with this digitisation and leapfrogging into financial inclusion, he said.

Vijayavergiya, citing RBI data, said in the first two weeks of demonetisation, one million new e-wallet users joined the bandwagon every day. In terms of value, mobile wallet transactions are estimated to leapfrog from ₹5,500 crore in 2015-16 to ₹30,000 crore in 2022.

On the other hand, the growth of credit and debit cards has been insignificant: in November 2016, Indians had 2.70 crore credit cards and 7.6 crore debit cards, with a month-on-month growth rate of only 1.7 per cent and 2.2 per cent, respectively.

On the other hand, during the same period, mobile wallets numbered 20 crore, with a 9.5 per cent month-on-month growth rate, and poised to grow to 65 crore by 2020, he said. The key levers to this amazing revolution towards a largely cashless economy in a country of 130 crore people — globally the first in a developing economy as the Western, Japanese and Chinese economies were all quite well developed when they progressed through this transition at a relatively slower pace — have been the ‘digital natives” (consumers) and infrastructure (smartphones).

From 2016 to 2020, the number of Internet users in India is estimated to grow from 37.5 crore to 65 crore and that of smartphones from 38 crore to 55 crore. So, even those without much literacy or having no computer or laptop are joining the digital transaction revolution in a big way.

“Seventy-two per cent of Internet consumed in India happens on a smartphone, one of the highest in the world, while the world’s average Internet consumption on mobile phones crossed 50 per cen, only last month,” said Vijayavergiya.

Rising smartphone penetration and Internet access has ensured that India rapidly evolves into a digital behemoth.

The impact of demonetisation has been immediate on cash-based e-commerce, too: In this space, cash-on-delivery decreased by 60-64 per cent since November 8.

Weekdays showed a decrease of 13-30 per cent in transactions; the hypermarket segment has been badly hit as sales fell nearly 68 per cent in the first week after the note-ban.

Of course, some no-changer and survivalist citizens instinctively opposed demonetisation and the resultant transition, unaccustomed as they were with this disruption brought about by a ‘technological tornado’, slowly absorbed and assimilated earlier only by the advanced economies.

“But this revolution is irreversible and here to stay for long,” said a Mumbai-based market researcher on condition of anonymity.

She said: “The opponents’ survival instinct has taken control of their very nature. Suddenly, their whole idea is how to ‘deal’ with this gigantic change in India, unlike the natural progression of the same revolution in other developed economies.

“Modi has, in fact, introduced the risky idea of a behavioural change of cashless-ness in a country where the goddess of wealth, Laxmi, moves the mountains of economy.”

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