Potentials - November/December 2017 - 15
16,000
14,000
12,000
10,000
8,000
6,000
Apr. 2011
Aug. 2011
Dec. 2011
Apr. 2012
Aug. 2012
Dec. 2012
Apr. 2013
Aug. 2013
Dec. 2013
Apr. 2014
Aug. 2014
Dec. 2014
Apr. 2015
Aug. 2015
Dec. 2015
Apr. 2016
Aug. 2016
Dec. 2016
Apr. 2017
Aug. 2017
4,000
FIG1 Currency in circulation.
currency notes, and the resultant
general activity level in the economy fell in the initial first few days
and weeks.
With scarcity of cash in the system, the use of debit cards at automated teller machines (ATMs) fell
sharply [Fig. 2(a)]. In terms of value,
ATM use plunged to its lowest level
since 2011, replicating the trend in
currency in circulation.
During this time, digital modes of
payments began to surge. Debit card
use at the point of sale (POS) shows
an inverted mirror image of its use at
ATMs, with digital transactions spiking
both in value and volume [Fig. 2(b)].
Total currency in circulation before demonetization, on 4 November 2016, was INR17,977 billion
and, as per the latest data from the
Reserve Bank, the currency in circulation on 1 September 2017 stood
2,500
Value (INR Billion)
Volume (Million)
Value
2,000
1,500
1,000
500
700
600
500
Value (INR Billion)
Volume (Million)
400
600
500
400
300
300
200
200
100
100
0
Apr. 2011
Aug. 2011
Dec. 2011
Apr. 2012
Aug. 2012
Dec. 2012
Apr. 2013
Aug. 2013
Dec. 2013
Apr. 2014
Aug. 2014
Dec. 2014
Apr. 2015
Aug. 2015
Dec. 2015
Apr. 2016
Aug. 2016
Dec. 2016
Apr. 2017
Aug. 2017
0
Apr. 2011
Aug. 2011
Dec. 2011
Apr. 2012
Aug. 2012
Dec. 2012
Apr. 2013
Aug. 2013
Dec. 2013
Apr. 2014
Aug. 2014
Dec. 2014
Apr. 2015
Aug. 2015
Dec. 2015
Apr. 2016
Aug. 2016
Dec. 2016
Apr. 2017
Aug. 2017
0
900
800
700
600
500
400
300
200
100
0
at INR15,649 billion. With rapid remonetization, the Reserve Bank has
already replaced 87% of the total
currency. Even with the replacement
of a substantial portion of currency,
the use of debit and credit cards at
the POS has not plunged back to the
predemonetization level. There appears to be some stabilization in the
increased level of digital payments
through debit and credit cards. This
shows that the demonetization shock
had a significant impact in changing
habits for at least few people (Figs. 3
and 4). Whether this is a structural
shift in the behavior of customers
brought in by the experiment of demonetization and/or if this is a new
normal in digital payments is too
early to establish with certainty.
During demonetization, the government provided several incentives
to retailers and banks to spread the
Volume
3,000
Value
With the withdrawal of 87% of the
currency in circulation, cash became
scar-
c e following demonetization
(Fig. 1). People flocked to bank branches to exchange their demonetized
18,000
Volume
Impact of demonetization
on ATM and POS usage
20,000
INR Billion
on cash for transactions. To take
away 87% of cash from such a cashdependent economy made the businesses and citizens gasp for alternate solutions. Timely measures and
promotional announcements by the
government to convert the distress
into an opportunity provided digital
payment an impetus, yielding immediate fruits. As aptly put by Mowat
and Harrabin, challenging the cash
market, which is 2,600 years old and
still the dominant form of transaction in the world today, would have
been as revolutionary as replacing
fire or the wheel.
Post demonetization, the government and the Reserve Bank of India
laid significant emphasis on digital
modes of payment by announcing a
series of promotional measures, such
as rationalization of merchant discount rate (MDR), reduction in tax
liabilities for merchants transacting
digitally, and promotion of mobile appbased payments in a big way. These
measures encouraged the migration of consumers from cash to digital modes of payments. We will now
examine how, in the aftermath of de--
monetization, the digital payment
space changed.
(a)
(b)
FIG2 Debit card use at (a) ATMs and (b) POS.
IEEE POTENTIALS
November/December 20 1 7
■
15
Table of Contents for the Digital Edition of Potentials - November/December 2017
Potentials - November/December 2017 - Cover1
Potentials - November/December 2017 - Cover2
Potentials - November/December 2017 - 1
Potentials - November/December 2017 - 2
Potentials - November/December 2017 - 3
Potentials - November/December 2017 - 4
Potentials - November/December 2017 - 5
Potentials - November/December 2017 - 6
Potentials - November/December 2017 - 7
Potentials - November/December 2017 - 8
Potentials - November/December 2017 - 9
Potentials - November/December 2017 - 10
Potentials - November/December 2017 - 11
Potentials - November/December 2017 - 12
Potentials - November/December 2017 - 13
Potentials - November/December 2017 - 14
Potentials - November/December 2017 - 15
Potentials - November/December 2017 - 16
Potentials - November/December 2017 - 17
Potentials - November/December 2017 - 18
Potentials - November/December 2017 - 19
Potentials - November/December 2017 - 20
Potentials - November/December 2017 - 21
Potentials - November/December 2017 - 22
Potentials - November/December 2017 - 23
Potentials - November/December 2017 - 24
Potentials - November/December 2017 - 25
Potentials - November/December 2017 - 26
Potentials - November/December 2017 - 27
Potentials - November/December 2017 - 28
Potentials - November/December 2017 - 29
Potentials - November/December 2017 - 30
Potentials - November/December 2017 - 31
Potentials - November/December 2017 - 32
Potentials - November/December 2017 - 33
Potentials - November/December 2017 - 34
Potentials - November/December 2017 - 35
Potentials - November/December 2017 - 36
Potentials - November/December 2017 - 37
Potentials - November/December 2017 - 38
Potentials - November/December 2017 - 39
Potentials - November/December 2017 - 40
Potentials - November/December 2017 - 41
Potentials - November/December 2017 - 42
Potentials - November/December 2017 - 43
Potentials - November/December 2017 - 44
Potentials - November/December 2017 - 45
Potentials - November/December 2017 - 46
Potentials - November/December 2017 - 47
Potentials - November/December 2017 - 48
Potentials - November/December 2017 - Cover3
Potentials - November/December 2017 - Cover4
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