September 6, 2017
India, the world’s fastest growing economy, is going through a bold transition. On November 8, 2016, the country set sail on a cashless journey on the back of a historic decision taken by the Indian government. Generally referred to as demonetization, the move involved declassification of larger bills of Rs 500 and Rs 1000, which constituted almost 85% of the entire physical currency in circulation. The objective was to facilitate a gradual transition towards a cashless society where digital payments will be the key method of financial transactions. For a country where cash has heavily dominated its overall financial transactions by value and by volume, this was no mean feat.
As Rome was not built in a day, the government has been creating the background infrastructure for such a decision to be taken. This includes creating a no-frills account for a billion people, enabling digital transactions through PPIs, developing a unique identifier for the population in the form of AADHAR, and providing IndiaStack APIs for seamless integration into the cashless layers. Some other initiatives were taken to push this cashless vision, such as providing new-age banking licenses to payment banks, strengthening the business correspondent network, and creating UPI (Unified Payment Interface) and BBPS (Bharat Bill Payment System).
As an initiative for curbing corruption and unearthing black money, demonetization also created the platforms for digital payments and cashless commerce in the progressive Indian economy. Initially, there were initial hiccups for the people as the ATM ran dry and as long queues in banks became alarming. The initial slowdown of local and small business operations also contributed to the challenges. Despite some initial obsta ...