Every time I see a long queue outside an Indian bank the Dire Straits song “Money for Nothing” starts playing in my head! The “dire” shortage of currency notes in India today makes a mockery of a progressive economy — what is the world thinking about India right now? There’s no doubt that the economy will be hit for a moment as consumer spending drops. There will be much hardship for the common man (I can see this already). It’s a situation reminiscent of war — people lining up for rations and using postage stamps.
On the positive side, this is a killer opportunity for the mobile wallet and credit card companies. And they are stealing the moment indeed — take a look at the full page ads in the local newspapers and the marketing messages from the credit card department.
The kirana (grocery/convenience) store on the ground floor in my building is giving me credit, has started accepting payments through PayTm and, (drum roll) started accepting credit cards!
India is largely a cash-based economy — (small) merchants prefer to transact with cash. The use of debit cards and POS machines has been steadily rising, albeit not fast enough.
But a move like this will accelerate the use of cash-less transactions, electronic transfers and of course, technology adoption (my Kirana store guy suddenly became tech savvy!).
India is also on the cusp on a mobile payments revolution. It already has a world-class framework in place to enable this called UPI (Universal Payments Interface). And the banks are ready to roll out UPI-based services. In fact, 2017 is going to be the year when we see a mobile payments revolution in India.
So the shortage of currency notes of higher denominations is indeed a blessing in disguise. It will accelerate the adoption of cashless and electronic payments.
So, there are two sides to every coin after all, (no pun intended).
The writer is also the Business Technology Editor at Banking Frontiers magazine. Views expressed are personal.