Take Away Graphs
On November 08, 2016, Prime Minister Narendra Modi announced one of the most talked about decision of ‘Demonetisation’, sort of a surgical strike to launch a multi-pronged attack on black money. This particular decision has brought about many positive changes in the Indian economy in the last two years, out of which the most significant change has been the Digitization of the Indian economy. In this article, The True Picture did an in-depth analysis of gauging the impact of demonetisation on digital payments.
Here is the list of all the parameters on which the marked impact of demonetisation has been noted.
- Digital Payments Trends in India – An Overview
- United Payment Interface (UPI) – An Upward Journey Continues
- Mobile Banking in India – Penetrating Fast
- Prepaid Payment Instruments – m-wallet Becoming Popular
- Debit Card – India Reaching 1 Billion Mark
- Debit card Usage at POS – Marks the Quantum Jump
- Bhim App – India’s Own Payment App – Growing Fast
- RuPay Card – Meteoric Rise Capturing Half of the Market Share
- Boost to RTGS, NEFT, and IMPS
- From ‘Financial Inclusion’ to ‘Digital Inclusion’
1. Digital Payments Trend in India – An Overview
Demonetisation has given a significant boost to digital payments as seen in the graph below. The following points are to be noted:
- It was the financial year 2016-17 in which the decision of demonetisation was announced and the same year noted the growth of around 70% in the number of digital payments (volume) as compared to the previous year.
- If the growth is seen from the perspective of a year before and after the demonetisation, then, there is a growth of 147% in the number of digital payments (volume) due to the demonetisation, taking the total digital payments by value to the whopping Rs. 1684 lakh crores in the year 2017-18.
- Importantly, the momentum of increase in the digital payments generated due to demonetisation has sustained even after a year. In the 5 months period of 2018-19, the total volume of digital payments has already surpassed more than half of the total volume of digital payments in the entire year of 2017-18. This completely falsifies the criticism that ‘the surge in the digital payments was temporary which mainly occurred due to the sudden jolt caused by demonetisation and people are or will move back to the cash system’.
Note- Digital Payment in this graph includes RTGS, Retail Electronic Clearing (which includes ECS, NEFT/EFT, IMPS, and NACH), Cards (Credit POS and Debit POS), PPI (which includes m-Wallets, PPI Cards, Paper Vouchers) and Mobile Banking.
2. United Payment Interface (UPI) – An Upward Journey Continues
Prime Minister Narendra Modi launched the Unified Payment Interface (UPI) in April 2016, to bring about uniformity and interoperability across the payment networks. UPI, which has now become a major mode of digital payments in India, got a major boost due to demonetisation as seen in the graph below. This new-age, technology-led government programme worked as demonetization was able to bring about a major behavioural shift in people as they moved from cash to cashless.
- There is a substantial growth of more than 5000% in the UPI transactions (volume) in the financial year of 2017-18 over the previous year.
- Even here, the impact of demonetisation on digital payments through UPI has continued in 2018. In the 6 months period of 2018-19, UPI transactions (volume) have increased by more than 150% of the total volume of UPI transactions done in the entire year of 2017-18.
3. Mobile Banking in India – Penetrating Fast
There was a time when very few Indians used internet banking on the big screen of laptops or desktops, let alone the mobile banking. However, this trend started changing after 2015-16 when many Indians moved towards using mobile banking, as seen in the graph below.
- Modi government’s push to JAM trinity (Jan Dhan Yojana-Aadhaar-Mobile) boosted the linking of mobiles with Jan Dhan bank accounts (30 crore beneficiaries).
- Mobile banking in India got a massive push because of demonetisation. The mobile banking transactions (volume) increased by 380% from the year (2015-16) before the demonetisation to the year after it (2017-18).
- Interestingly, defying the adage ‘old habits die hard’, Indians are increasingly adopting mobile banking as a mode of the transaction with each passing day. The transactions (volume) in the 5 months period of the current year 2018-19 is 293% more than the mobile banking transactions (volume) done in the entire 2015-16, a year before the demonetisation.
4. Prepaid Payment Instruments –m-wallet Becoming Popular
The Indian youth these days find it difficult to transact without m-wallets (Mobile wallets like PayTM, Google Pay etc). Below graph validates this assertion.
- Prepaid Payment Instruments (PPI) which also includes m-wallets have seen a huge rise in the last 2 years. There is a growth of 362% in transactions (volume) through PPI in 2017-18 as compared to 2015-16, a year before the demonetisation was announced.
- The JAM trinity (Jan Dhan-Aadhaar-Mobile) has also played a significant role in the rise of PPI as the greater number of mobiles are being connected to bank accounts under Pradhan Mantri Jan Dhan Yojana. The Yojana has taken mobile wallets even to the rural areas.
5. Debit Card – India Reaching 1 Billion Mark
Moving from a cash-based economy to a card-based economy, India has taken a quantum jump in the total number of people having debit cards in the country as seen in the graph below. This significant rise in the number of debit cards has further pushed the digital payments in India.
- India had 8.4 crore debit cards in 2008 which has now increased to 98 crore debits cards in 2018, an enormous growth of about 1000%. India will soon have 100 crore (1 Billion) debit card holders.
- Most of the growth in the number of debit cards in India can be seen after 2014-15 when Prime Minister Narendra Modi launched the Jan Dhan Yojana and the debit cards were issued with the bank accounts.
Note – Figures in the next financial years includes the figures for the preceding year.
Jan Dhan Account Yojana and RuPay Debit Cards
As seen above, the significant rise in the number of total debit cards and its usage at the POS is primarily due to two factors, outlined below:
- One, almost 25 crores RuPay debit cards have been issued under the Jan Dhan Yojana only as shown in the graph below.
- Two, demonetisation played a major role in the usage of debit cards which pushed people to move to cards instead of cash. This immensely helped in increasing the digital payments.
- Importantly, India has not only seen a growth in the number of total debit cards or RuPay debit card, but the usage of debit cards at Point of Sale (POS) have also seen a significant jump.
Note – Figures in the next financial years includes the figures for the preceding year.
6. Debit card Usage at POS – Marks the Quantum Jump
The New India now finds it much easier to swipe its debit card at retail shops or at outlets in malls rather than carrying and using cash.
- The total value of debit card transactions at POS increased from Rs. 13,556 crores in August 2015 (a year before the demonetisation) to Rs. 35,665 crores in August 2017 (a year after demonetisation). This is again a significant growth of 163%.
- Debit card usage at POS after demonetisation has been rising by leaps and bounds. There is a growth of more than 350% from August 2014 to August 2018 due to both Jan Dhan Yojana RuPay debit cards and demonetisation, as seen in the graph below.
7. BHIM App – India’s Own Payment App – Growing Fast
Indian government launched its own Bharat Interface for Money (BHIM) App which has revolutionised the digital payments in India. There have been more than 3.5 crore downloads since its launch as shown in the graph below.
- It is interesting to note that as per a report, 30 countries have approached the Government of India to acquire the technology behind the BHIM App.
- Not only the downloads of BHIM App but also the number of the transactions (volume) and value of transactions have also risen significantly as seen in the graph below.
- With increasing access to banking in the rural areas coupled with the push given by the demonetisation, there is a growth of more than 1300% in the number of transactions (volume) in 2017-18 over the previous year. Similarly, the value of money involving BHIM App transactions has increased by more than 1500% in 2017-18.
8. RuPay Card – Meteoric Rise Capturing Half of the Market Share
The below graph suggests that after 2014, RuPay card has increased its market share from a tiny 0.6% in 2013 to a significant 50% in 2018. This market share has not only increased the digital payments in India but it has also troubled the business equations of the many international players like Mastercard, Visa, and American Express among others.
- Demonetisation has further pushed this rise as explained above.
Indian businesses and individuals have traditionally used Real Time Gross Settlement (RTGS), National Electronic Fund Transfer (NEFT) and Instant Money Payment System (IMPS) as modes of digital payments. But interestingly, all the three modes have been used more frequently after demonetisation.
- As shown in the graph below, there has been an increase of more than 107% in the value of transactions done through NEFT in the year before (2015-16) and after (2017-18) the demonetisation.
- IMPS, more frequently used by individuals, has seen the significant rise of more than 450 % in the value of transactions done through IMPS in the year before (2015-16) and after (2017-18) the demonetisation.
- Not only the NEFT and IMPS, but RTGS has also seen the jump of about 40% in the value of transactions done in the year before (2015-16) and after (2017-18) demonetisation.
- Interestingly, the momentum generated by demonetisation has increased these digital payment modes In the 5 months period of the current year 2018-19, the value of transactions through RTGS has already reached Rs. 672 Lakh crores. This is almost half of the value of transactions done in the 12-month period of 2017-18. This suggests the constant rate of growth in the value of RTGS transactions even in 2018-19.
10. From ‘Financial Inclusion’ to ‘Digital Inclusion’
If digital payments trends in India (Graph-1) are seen closely, there is an interesting observation about increasing digital reach in the country. The below graph shows the trends of the 3 years i.e. 2015-16, 2016-17 (demonetisation was announced) and 2017-18.
- The volume of overall digital payments in India has increased more than the value of money involved in those transactions. This leads to the conclusion that the number of small transactions has increased in India which means that a greater number of people are now doing digital
- This justifies the idea that if India through schemes like Jan Dhan Yojana has moved towards ‘Financial Inclusion’, then, it is the demonetisation that has taken the country towards ‘Digital Inclusion’.
Demonetisation, as explained above, has brought about a sustainable increase in the digital payments in India, through all modes, by significant percentages. Even after 2 years of demonetization, the momentum of digital payments is increasing enormously. In the background of the decision of demonetisation, the current government has brought significant schemes like Jan Dhan Yojana, RuPay cards, JAM trinity (Mobile Banking), UPI and BHIM App, support to Direct Benefit Transfer (DBTs) which has made our economy more digital, more transparent and more accountable. On top of it, this digitization has been increasingly adopted by Indians. Consequently, the country has truly shifted toward a ‘less cash economy’ or a ‘card-based economy’.
RBI Annual Report
RBI Monthly Bulletin