Scrapping Rs 500 & 1,000 notes: Why India's start-ups are rejoicing

Cash on delivery has long been a pain point for start-ups, reports Tech in Asia

In a surprise move, Prime Minister Narendra Modi on Tuesday announced that banknotes of 500 and 1,000 rupee denominations would be withdrawn from circulation at midnight, as the government cracks its whip against corruption and counterfeit currency.

Reuters reported that even the head of the country’s largest government-backed bank had not had much time to act on the government’s decision

"We have handled demonetisation earlier and will do so again. Tomorrow banks will remain closed in order to withdraw these notes from counters and ATMs. We will strive to restock ATMs at the earliest and make them operational," chairman Arundhati Bhattacharya told the news wire late on Tuesday.

 

However, unexpected winners emerged from the cacophony – Indian start-ups. Top start-up founders were quick to voice their support for the move, as this naturally means Indians will be nudged towards online payments and cashless transactions.

Keep the money digital. Superb step by our dear PM @narendramodi
From a bit inconvenience to incredible bold step ! #win #????????

— Vijay Shekhar (@vijayshekhar) November 8, 2016

@kunalb11 Is @FreeCharge doing something to convert this into an opportunity?

— Aashutosh Vatsa (@aashutoshvatsa) November 8, 2016

Cash on delivery to be a thing of the past very soon. Expect massive adoption of digital payment systems like @FreeCharge in place of cash!

— Kunal Bahl (@1kunalbahl) November 8, 2016

Landmark move by PM @narendramodi. This is our first major step towards encouraging a cashless economy. More power to a Digital India!

— Bhavish Aggarwal (@bhash) November 8, 2016

Why the cheer? Cash on delivery has long been a pain point for start-ups in the country. Because India is a cash economy, everyone including Amazon and Uber toed the line and introduced the practice of accepting cash payments to service the Indian customer.

However, offline payments take a longer time to reflect on the books, and are fraught with problems. Accepting cash requires hiring staff to manage it, and for e-commerce companies, cash also leads to a higher return rate.

As more Indians are forced to make cashless transactions, it will get easier for start-ups to convince them to pay online for their services.

Fintech start-ups lost no time in driving home that point.

We have got two words for you: Paytm Karo.

— Paytm (@Paytm) November 8, 2016

Great Move! Trash the Cash-Just Freecharge #Freechargenotcash

— FreeCharge (@FreeCharge) November 8, 2016

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This is an excerpt from Tech in Asia. You can read the full article here