India made the shock move to get rid of two of its lower levels of cash notes this week, in the latest bid to go fully digital. The fintech world is excited.
There have been two shock developments this week. One, taking up much of the media’s time and energy, saw a surprise US president elected. The other, perhaps missed by many, saw India abolishing two lower tiers of cash.
In a sudden move on Tuesday evening, Indian prime minister Narendra Modi declared that Rs 500 (€6.80) and Rs 1000 (€13.67) notes were abolished, as of midnight that night.
The move was apparently aimed at reducing black-market money, known as black money in the country – a source of deep frustration for the government.
However there’s another reason behind the move: India’s drive towards digital.
In 2014, Modi began what’s called the Pradhan Mantri Jan-Dhan Yojana: his mission to eradicate black money. What was interesting about the initial move was the plan to give everybody a bank account – financial inclusion on a massive scale, so to speak.
By the summer this year, over 220m bank accounts were opened under the initiative.
What followed Modi’s 2014 push was a payments scheme to allow people buy and sell online more easily, with the recently introduced Bharat Bill Payment System the latest attempt to institutionalise digital payments.
Fintech, so, is a growing industry in the country.
As Reuters reported earlier this week, Paytm, India’s top mobile payment wallet services provider, is already booming.
App downloads have jumped 200pc, with a 1,000pc increase in the amount of money added to its wallets since Tuesday.
MobiKwik, which also offers mobile wallet services, said it saw a more than 40pc increase in app downloads.
“We’ll be a country with a lot more digital transactions and payments now,” said Vijay Shekhar Sharma, chief executive of Paytm, whose biggest shareholder is Alibaba Group.
Today should be digital India's luckiest day and start of golden age for all FinTech companies. Privileged to be born in this time and age! https://t.co/NTJAEYIQay
— Vijay Shekhar (@vijayshekhar) November 9, 2016
Capital Float, one of India’s leading fintech start-ups, said the move will help companies like it to target more customers.
“A company like ours typically targets the small and medium businesses and the kirana stores [a small neighbourhood local store],” said Gaurav Hinduja, co-founder and MD of the company.
“As liquidity for big currency notes in the country reduces, more and more people will be forced to transact digitally, thus increasing our customer base.”
As fintech’s significance grows in the region, and financial inclusion in general takes hold across Asia and Africa, state initiatives to enhance relevant companies’ services could be viewed as quite progressive in the long run.