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Did Demonetization Pressure Tilt Indian Digital Barometer?

The question though is whether it tilted enough, considering the inconvenience caused by demonetization. Digital is important to economy as it brings down cost of transaction, improves efficiency of financial system, increases transparency and transforms customer experience. Replace of more cash by digital and adoption of digital by a wider population are key tests. Hence both volume and value matters!

Usage of Debit cards in ATMs

Key Insights:

  1. ATM transactions has grown faster (18.7%) than number of active cards (10%) in Jan 2019: Reflected in more transactions per card in a month which is not a good sign from digital perspective.
  2. Value withdrawn per transaction or per card has shown perceptible reduction in 2019: It can mean multiple things. Either more people in middle-lower strata have started using debit cards or people are withdrawing in smaller amount (people are seeing lesser need for cash?). Both are good for digital economy.

The next question that arises is that how to validate that digital has spread to lower strata of the economy as well. For this we analyzed the AEPS (Aadhaar Enabled Payment System) data. It also shows marked improvement as depicted in below chart. Here also we see decrease in the amount per transaction as noticed in our earlier chart as well.

Indian Payment System Landscape (Overall excluding RTGS)

Key Insights

  1. UPI (Unified Payment Interface) contribution to total payment transactions is not only the highest but also clocked the highest growth. IMPS is the only one whose contribution has increased. Rest all have reduced. This is significant change in Indian payment landscape
  2. UPI contribution to total payment value has also shown remarkable improvement (0.6% to 3.6%) which is reflective of its wider adoption
  3. Paper clearing (cheques) usage is on the wane. Its contribution to overall payment landscape has reduced significantly both by value and volume
  4. NEFT, Credit card and Debit card usage at POS have stayed put in terms of value contribution but have shown decline in importance in contribution to volume. This signifies that people are resorting to these payment modes only for high value transactions. The same is reflected in the ‘Value per Txn’ graph.
  5. Overall progress of digital in Indian payment landscape seems to be quite impressive. Innovation in payment modes has also helped the cause.

Indian Payment Landscape (Mobile Banking and m-Wallets)

Key Insights

  1. Smart phone revolution has obviously shown its impact on the payment landscape as well. Both volume and value has grown by ~ 2.5X from Jan-2018
  2. The lowering in value per transaction is also a very good sign. It is reflective of the wider adoption of mobile phone for various types of payments and also by various section of people
  3. m-wallet has grown only by around 25-30%. This is probably because of the several regulations brought in by RBI to regulate the use of wallet.

Trivia (Payment Banks and Small Finance Bank)

We also wanted to analyze how likes of Paytm and other payment banks or SFB’s have contributed to the Indian payment landscape. The following table provides the necessary details. Among payment banks, Paytm is way ahead of others (~75%). Airtel and Fino are a few other players with some perceptible contribution. Expectedly, payment bank has more contribution.


We don’t think the digital progress is questionable. The payment landscape shows significant impact of digital both in value and volume. It is reflective of wider adoption both in terms of different sections of people and also in terms of different use case.

The concern is that the usage of cash in economy do not seem to abate. That people are withdrawing in lesser amounts per transaction is positive. This needs to be constantly monitored.

Lastly we want to conclude from what we are observing in our daily lives. Today the cable guy, vegetable vendor or the non branded grocery shops are all comfortably using wallets. There is similar ease of using the same by customers across genders and age.

Such a change takes time but we have achieved significant milestones. Demonetization seems to have been successful in giving that nudge to the digital barometer. Whether it was worth it, is another question which is covered in our earlier article (click here).


  1. Bank wise ATM POS Statistics Jan 2017, Jan 2018, Jan 2019 from RBI
  2. RBI Table 43 Payments Data March 2017, March 2018, March 2019 from RBI
  4. Featured image from https://freerangestock.com/

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