Archana Khosla

Archana specializes in Startup advisory, corporate commercial and boutique private equity. She has mentored and advised several start-ups on regular day to day aspects, as well as helped them raise capital and has worked on M&A, joint ventures, and angel, seed, venture capital and private equity investments. Vertices Partners is a niche service oriented boutique law firm specializing in Start Up Advisory, Private Equity, Corporate, Commercial, M&A, Venture Capital, White Collar Crimes Advisory, Banking Code & NCLT, Commercial Litigation & Arbitration, Intellectual Property, Real Estate, Media & Technology

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Demonetization to Digitalisation - A Move Towards Cashless and Transparent Economy

The biggest beneficiary of this demonetization movement will be the FinTech start-ups, digital wallet, and other mobile payment companies.

Demonetization to Digitalisation - A Move Towards Cashless and Transparent Economy
Demonetization to Digitalisation - A Move Towards Cashless and Transparent Economy

“Let us Ignore the temporary hardship, Let us join this festival of integrity and credibility, Let us enable coming generations to live their lives with dignity, Let us fight corruption and black money, Let us ensure that the nation’s wealth benefits the poor, Let us enable law-abidingcitizens to get their due share.” Narendra Modi

Given the latest developments, the FinTech companies should have a reason to rejoice with the bold move made by our Hon’ble Prime Minister on the evening of 8th November, 2016 that ₹1000/- and

₹500/- currency note will no more be valid.

The legal tender character of the notes in denominations of ₹1000/- and ₹500/- has been withdrawn to combat black money and reduce the counterfeit currency. In consequence thereof, the aforesaid withdrawn high denomination notes cannot be used for transacting business and/or be stored for future usage. Due to this demonetisation movement, India will witness the increase in penetration of electronic payment methods, more credit/debit card transactions, increase in digital payments, mobile payments and online banking which will push the vision of Digital India further.

The biggest beneficiary of this demonetization movement will be the FinTech start-ups, digital wallet, and other mobile payment companies. Consequent to the sensational ban put up on the prescribed bank notes, the Automated Teller Machine (ATM) kiosks have been breaking an all-time record in terms of public foot falls. The long que in the banks and outside the ATM kiosks have encouraged the public to switch to the payment platforms.

Amidst the bank note chaos, the digital wallet companies have seen an unprecedented surge in the number of signups and people adding money in their wallets. E-wallets are leaving no stone unturned to maximise their customer base. Service providers are waiving off fees for merchants and customers to get them on-board. It is a prodigious move and will increase the potential of the online market size multi-fold. It will boost innovation in the nascent electronic payment and electronic invoicing industry. The curbs introduced on the use of high value denomination notes, will accelerate the adoption of e- commerce websites and digital payment options such as wallets, credit and debit cards.

Considering the macro picture, this whole move has laid the foundation for a golden era in the ecosystem of FinTech start-ups which will multiply the opportunities in India for developing electronic payment methods. Looking at the numbers and the pace at which the digital payment sector is progressing, FinTech start-ups will be considered the most sought after money churning avenue for the investors. In the FinTech space, transaction gateways and platforms, mobile banking and ATM and Point of Sale services are the emerging horizontals. Start-ups are more focused around payment processing and trading solutions.

Further, with this move in play, the impact on the start-up economy will be positive. More government funding can be ploughed into start-up and innovation programmes through collection of unpaid tax dues. The trust factor and accountability will be strengthened towards the source of private/angel money invested in start-up. It will also improve the financial transparency. And most importantly, the process to raise funds internationally will be streamlined.

India has made significant financial inclusion advancement in the past two years. The payments sector in India is evolving fast, offering customers with myriad choices to make payments by integrating it well with mobility (smartphones, apps), cloud tech and by expanding its reach to sectors like retail, entertainment and others. Demonstrating the effectiveness of digital payments for high-frequency low- value transactions will compel more and more mobile users to install m-wallets

FinTech is disrupting consumer finance by providing people better access to spending, credit and investing information for them to make rational decisions. The Fintech start-up companies are increasingly focusing on customer experience which acts as a differentiator compared to banks. FinTech start-ups’ efforts are focused on simplifying and innovating transactions in the digital platform so that they can rapidly change the way customers are transacting. A swift look at the Indian consumer financial landscape, especially Digital payments, which gives a fresh hope of optimism.

Use of Debits Cards to Surge

Increased Use of Mobile Wallets

Impact of demonetization on Digital Payments

Unified Payment Interface (UPI)

Rise in Point of Sale (PoS)

to become more Important


Initiatives by Government and Regulators

This move might have been regarded as a step to encourage digital payments but this not the first one. The FinTech sector has been recipient of various key initiatives from the government and regulators. Unified Payments Interface (UPI) an interoperable system launched by the Reserve Bank of India (RBI) and the National Payments Corporation of India (NPCI) which will allow peer-to-peer and peer-to- entity payments, the vision of Digital India a flagship programme of the Government is to promote mobile and digital banking to encourage financial inclusion, Small Finance and Payments Banks, the launch of the government’s Start-Up India, Bharat Bill Payments System (BBPS), eKYC, Prepaid Payment Instruments (PPI), the Government has encouraged the shift to a less–cash society with its push for digital payments through the JAM Trinity: the Prime Minister’s Jan-Dhan Yojana, Aadhaar, and mobile connectivity, Digital Consent, Payment Banks and Small Finance Bank. In combination, these real-time digital services will enable startups to digitize and simplify everything from bank account creation to security, from voting and subsidy distribution to tax filing and refunds across the world.

The day is not so far when the currency will become technologically obsolete.

This quote very well captures the bright opportunities lied in store for the FinTech start-ups“view change as a chance, because it’s a chance for something better”.

Archana Khosla, Founder Partner, Vertices Partners, Assisted by Vishal Mehta, Associate Manager, Vertices Partners and Nirav Punjani, Associate, Vertices Partners.

Disclaimer: The views expressed in the article above are those of the authors' and do not necessarily represent or reflect the views of this publishing house

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demonetization digitalisation Cashless economy

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