How great e-wallets were in the repercussion of demonetization?

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Demonetization in the perspective of an Economist.
13/12/2016
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New features for 500 & 2000 rupee currencies
13/12/2016

Ninth of November woke with a frowny face, most of them with an apprehension about the 500 and 1000 notes in hand. It was an unexpected blow to many out there because most didn’t catch what happened in the dusk of previous night. It took a while for many to finally understand that Indian Government was initiating a surgical strike against black money. That’s how great it was. Aged people found it really difficult to survive without their old school paper currency, but their younger heirs don’t seem to have much effect even when the largest denomination are wiped from the economy. Thanks to e-wallets!

E-wallets are basically digital or electronic wallets without any need of physical cash apparently to use them. They can be used normally like you would do with your debit or credit card, provided you have money loaded inside it. E-wallet happened to be a solace for retailers, restaurants, small shops, markets, textiles and all of them who don’t have a POS (Point of sales) machine in hand. All you have to do is take out your smartphone,  find a link to connect with paying end, just enter the amount & password -click ‘Ok’ that’s it. For example, Paytm is an online service providing e-wallet. Paytm service can be availed using their mobile application downloaded from play store or marketplace. Even one can send money to someone’s mobile number, which they can claim later upon signing into the app.

Before you proceed further, let us jump into a little depth regarding digital wallets. In order to understand “How They Work?” you must gust some of its rudiments. Usually, digital wallets work in a ‘point to point’ fashion. Mostly they are connected through a device like smartphones, where the channel of communication connecting it with the vendor’s account will usually vary from NFC, WEBLINKS, QR-code, SMS, Social media etc. They are basically divided into three classes like closed, semi-closed and open wallets depending upon their versatility in payment options. A closed one can only be used for providers purchase like Flipkart, Amazon card, whereas Paytm, Freecharge, MobiKwik etc. fall into the semi-closed class as they allow money transfer to all those who are connected with their app. However, Visa, MasterCard etc. may be understood as open wallets as they can be used anywhere using a number of payment choices. While the former two cannot   withdraw money, the open wallet can be used in banks and ATM’s to obtain physical cash. In fact, their service diminished the hardships by a great factor.  Many online vendors haven’t had any problem with sales because they mainly depend on digital wallets for the transaction.

Paytm might be one great example for understanding the effect of demonetization on e-wallets. Within a week into note ban paytm witnessed a whopping 8 million new subscriptions and 120 crores worth transactions. This indeed gave an idea how much people are willing to change into a digital era. One97 communication owning the paytm just crossed $5 billion in GMV (Gross Merchandise Volume). After demonetization 65% of the whole offline transaction gone digital from a 15%, 6 months ago.  The story is not yet complete, in the aftermath of demonetization many other companies found a hidden treasure and renovated their modus operandi. Vodafone m-Pesa, Airtel Money, Ola money, MobiKwik and the names are endless. But it’s the paytm that went viral among people, offering a candle in the nightfall.

Even the government took the initiative to guide people through the digital pavement. Suggested by Governor Raghuram Rajan, RBI took lead in developing the UPI (Unified Payments Interface) to ease off the hardships public is facing. The portal is developed by the National Payment Corporation of India (NPCI) which is the umbrella organization for all e-payment portal in the country.

Visa, RuPay , MasterCard, Maestro, Citrus etc. fall into the category of open wallet, which in turn decreased the hardship impact of demonetization to a great extent. According to the experts, mobile payment will be extensively used in the backwash of demonetization anticipating a similar financial strike in the future as a war against black money and financial instability. Moreover e-wallets like paytm, payumoney etc. catch the market attention by dispersing many offers, which people can’t refuse. Who wouldn’t mind discounts & offers in return, after all?

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