The Prime Minister’s announcement has given a massive boost to digital money in the country.
Market experts said credit and debit cards, online payments, Unified Payments Interface (UPI) and mobile wallets would now play a larger role.
Chanda Kochhar, MD and CEO of ICICI Bank, said: “I welcome the announcement made by the PM to de-recognise Rs 1,000 and Rs 500 notes. It is perhaps the most significant move ever taken to curtail the parallel economy. This move will give a sharp boost to all formal channels of payment, which in turn will help the formal economy to grow.”
Vijay Shekhar Sharma, the chief of mobile wallet giant Paytm, applauded the PM for the “most ambitious surgical strike”. “Welcome to truest digital cash India. Now proud sponsor @narendramodi #PaytmKaro! (sic),” Sharma tweeted. He further tweeted that people should keep money digital. “The biggest, the boldest and the most ambitious surgical strike by any government in the world. Hats off to our PM for removing Rs 500/1000 notes (sic),” he tweeted.
According to industry estimates, there are around 200 million users of digital wallets in India. Paytm has around 135 million users. Industry experts said India’s retail market transaction was now about $1 trillion, of which around eight per cent was via digital transaction.
Experts, however, said the number of digital wallet users might not go up overnight, as the ones who would be affected by the government’s move would be people with black money.
Sunil Kulkarni, deputy managing director of Oxigen Services India Private Limited, said: “It is not going to change the genuine cash market as people would still transact in that. However, in a shorter period, we hope to see a rise to 15 per cent in top usage of digital money and wallets, and in the long term it would be around 40 per cent.”
Online marketplaces are also hoping to see a significant drop in their cash-on-delivery (COD) transactions. Most marketplaces register almost 60 per cent of transactions in cash, which is a major headache for them as getting back the cash into a company’s coffers also requires spending capital.
Kunal Bahl, co-founder and CEO of Snapdeal, said: “With this, the quantum of India’s economy moving through the digital pipes will witness a massive growth. Both Snapdeal and FreeCharge are committed to supporting all such initiatives.”
However, the trading community is worried of the bloodbath that would happen in the market from Wednesday. According to industry experts, as much as Rs 30,000 crore of black money gets circulated among traders on a daily basis. “It is a nuclear bomb of a declaration, the markets would be crushed. For the next three months or so the market would go down. Traders do not have Rs 100 notes, there is going to be a cash crunch and big traders might have to shut shop,” said a major merchant from a trader body.