Regarded as a major steps towards addressing the black money problem in India, the Indian government’s decision to demonetize the Rs.500 and Rs.1,000 currency note has resulted in increased use of mobile wallets. With only Rs.100 and lower denominations being accepted, many are resorting to online banking and online payment mediums to handle their daily expenses. In fact, since demonetization has come into effect, mobile wallets have witnessed a massive rise in app downloads. With programs of financial inclusion, digitization of the economy and increased use of smart phones, online transactions are already quite popular among the urban Indian population. According to analysts at Technavio, by 2018 the mobile wallet market in India will grow at a CAGR of 140%, while the global mobile wallet market will register a CAGR of 34% by 2020.
Demonetization, mobile wallets and digital India
Until now, digital disconnect has been a major challenge in India, as many have preferred transacting in cash instead of making use of bank transactions and plastic money. With demonetization in effect, several digital payment solution providers have created innovative ways to attract new customers. The result has been mobile wallets like Paytm witnessing 200 percent increase in app download numbers, and Ola Money seeing a 1,500 percent increase in wallet recharges. These digital wallets not only help in paying electricity, DTH, and transport bills, but they also enable payments at nearby mom-and-pop stores that are already registered for these services.
The vision of connecting Indians through digital media has been further encouraged by this move on the part of the government. The m-wallet (mobile wallet) segment broadly consists of services related to banking transactions, transfer of money as well as value-added services like bill payments, shopping, ticketing, etc. Of these services, m-wallets are primarily used for the transferring money, followed by the payment of bills.
Global mobile phone internet user penetration 2014-2020
Source: Technavio
Until recently, a lack of proper infrastructure was regarded as a major road block for the vision of Digital India, but with the launch of 4G internet along with the present use of 3G internet and increased mobile penetration, it seems that, in less than a decade, many Indians will switch to a digital medium for financial transactions. Mobile as a point of sale (PoS), point of purchase and point of acceptance have the potential to lessen the digital divide between urban and rural India, along with drawing the masses into the net of financial inclusion.
In fact, countries like Bangladesh and several countries in Africa are already working towards making use of mobile phones for the financial inclusion of the masses, through features like Bkash and M-Pesa. India is poised to witness a major revamp of its economy through the filling in of current loopholes in the financial system and the channeling of the money market through better organized mediums.
The way forward
Reducing the volume of cash transactions and resorting to a foolproof medium of financial tracking is one of the best ways in which the menace of black money can be eradicated. According to economists, by not integrating the Indian economy with digital media, India will lose the opportunity to save close to 2% of the GDP, which is around Rs. 2,15,000 crores. With the stakes being so high, it only makes sense that, going forward, there is a consistent initiative towards educating the masses on the advantages of switching to digital modes of financial management.
Learn more about how mobile wallets are changing the financial paradigm:
The 2016-2020 Report on the Global Mobile Wallet Market
