Limited availability of cash will drive people to digital alternatives. The government is restricting the number of notes a consumer can exchange to INR 4,500 (about USD 67). There are also restrictions on ATM withdrawals, and huge queues have already formed outside of post offices and banks. This means people may not be able to retrieve the new cash they need before official businesses stop accepting the old bills, which could force them to turn to other methods of payments they have not previously considered, including mobile wallets and P2P solutions.
The unbanked may now have no other options except digital payments. Many segments inIndiaare unbanked, especially drivers, small grocery store (kirana) owners, small retail shop owners, and travel agent businesses. With a suddenly diminished availability of cash, these segments will be compelled to find alternatives — and many will likely turn to mobile wallets as they are typically easier to acquire than bank accounts with debit cards
More digital transactions will generate more customer data. This will allow online lending platforms, alternative lenders, and other FinTech’s to make better assessments of potential borrowers’ creditworthiness. As a consequence, availability of credit from these FinTech’s may increase.
A boost to the FinTech sector could help another government policy succeed. The Indian government has been promoting digital finance for some time. Earlier this year, the Reserve Bank of India (RBI) launched United Payments Interface (UPI), a tool that allows users to access multiple bank accounts and merchant payments within a single mobile app. The government is keen on a transition to a cashless economy because it could be cheaper to run, help reduce the underbanked population, and reduce financial crime as electronic payments are easier to track. Growth of the FinTech industry, and increased use of FinTech products, will only further drive the move toward a cashless economy
