Demonetisation Anniversary: How the note ban helped in the rise of digital payments, UPI in India
Demonetisation is one of those monumental events in recent Indian history. We can all still recall exactly where we were and what we were doing when the demonetisation announcement was made. Many of us also remember how we rushed to the nearest ATMs to withdraw cash, only to see a large crowd already gathered there.??
How digital wallets benefited from?demonetisation
Another vivid memory from the immediate aftermath of the demonetisation announcement was seeing full-page ads from Paytm in nearly all newspapers the next morning. Paytm, which was then primarily a wallet-based payment service, was one of the biggest beneficiaries of demonetisation as people were compelled to adopt digital transactions.??
Digital wallets vs UPI?
One of the several objectives the government announced for demonetisation was to make India a cashless economy and encourage digital transactions.??
However, unlike today, digital transactions were in their infancy in India in 2016 and were dominated by wallets like Paytm, PhonePe, Mobikwik, Freecharge, Oxigen, and more. The biggest drawback of these wallets was that users had to first add money to them from their bank accounts, and transactions were only possible between two users of the same application.??
This, combined with the fact that most businesses still did not accept payments through such applications, made digital transactions challenging.??
UPI and digital payments revolution in India?
However, things changed with the launch of Bhim UPI and other UPI-based payment apps like Google Tez. It should be noted that PhonePe had launched UPI payments in August 2016 but had struggled to gain widespread adoption among users.??
Unlike wallet apps, where users had to load money into their accounts first and could only transfer within the app¡¯s ecosystem, UPI enabled instant cash transfers from one bank account to another, regardless of the platform used by the sender and receiver.??
Over the years, innovations like e-sim-based sound boxes have made UPI payments reliable and accessible for even less tech-savvy shopkeepers, who were previously hesitant and skeptical. While the overall success of demonetisation remains a highly debated topic, there is no doubt that it helped lay the foundations of the current digital payments ecosystem in India.
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