If there is one big positive that demonetisation has brought to the economy, it is the digitalisation drive.

This has brought dividends to the common man in various spheres, including efficiencies in government services such as payment of taxes and utility bills.

Clearly, the Centre has helped the cause by remaining steadfast in its commitment to automate the tax administration — both IT and GST.

Prime Minister Narendra Modi’s actions to digitise India has brought a momentum to the entire payment ecosystem and helped build a new framework for the digital economy.

According to government sources, digital transactions since demonetisation have grown manifold on a month-on-month basis. For instance, volume wise, transactions via NACH, IMPS, UPI+BHIM and Rupay have grown to ₹1,47,624 crore in September 2017, against ₹1,07,987 crore in October 2016. Similarly, transactions through debit cards, credit cards, NEFT, RTGS and mobile wallets have grown from ₹1,07,59,649 crore in October 2016 to ₹1,23,28,369 crore as of July this year.

Although the quantum of digital payments is still a drop in the bucket (cash is still king), it has led to several positives for NBFC and insurance players.

The clear winners of the note-ban are the digital backbone providers — smartcard manufacturers, payment gateway firms, electronic wallet companies, e-commerce platforms and telecom companies.

Growth driver

The financial services industry is more or less positive on the impact of demonetisation on digital payments. Raman Aggarwal, Chairman, Finance Industry Development Council, a representative body for NBFCs, says that digitisation has indeed picked up, but it’s difficult to quantify it. The adaptability to various digital payment modes has picked up, he added.

“Demonetisation, while temporarily affecting collections in the third and fourth quarter of 2016-17 (now NBFCs have bounced back), has clearly acted as a catalyst to boost the digital payments mode,” he says.

Karni Singh Arha, Chief Financial Officer, Aviva Life Insurance, says the life insurance industry witnessed a sharp spike in cash payments of premiums soon after demonetisation. “However, over time, we have seen even households from tier-2 cities that preferred cash getting comfortable with NEFT and ECS mandates.”

This huge behavioural change has significantly improved contactability and will reduce unclaimed funds, Arha added.

Rajat Gandhi, founder and CEO, Faircent.com, a peer-to-peer lending platform, says demonetisation brought “tailwinds”, that drive business growth.

Wider taxpayer base

Archit Gupta, founder and CEO, ClearTax, says it increased the taxpayer base, which is a clear plus. “At ClearTax, we have already seen the beginnings of this digitalisation revolution with a 50 per cent overall increase in the number of returns filed as compared to last year,” he said.

As per reports, deposits up to ₹80 lakh were made in 10.9 million accounts in November-December last year, and over 1.48 lakh account holders deposited an average ₹3.3 lakh in their banks. The impact is seen in the number of tax filings for the period April-May 2017, which went up by 17 per cent to 27.5 lakh returns from a level of 23.5 lakh in the same period last year.

“As more people file their tax returns online, they will look for tech platforms that will speed up the returns filing process,” Gupta said.

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