Demonetization 2016 – Heyday for FinTech in India

In an unprecedented move to crackdown corruption in India, the Prime Minister of the country made an announcement on the eve of 8th November 2016, declaring all Rs 500 and Rs 1000 notes illegal from midnight. While the move came as a nasty shock for people on the wrong side of the law, the honest middle class heaved a sigh of relief as this would mark the first of many steps to tackle the issues of black money, bribery, fake currency, and terrorism in the country. With a huge number of notes out of circulation overnight, banks were faced with the mammoth task of exchanging genuine high-denomination while ensuring that branches and ATMs were updated and replenished efficiently.

In all this hustle and bustle of the demonetization process, it is interesting to see the plan of action that had been leading up to this moment. First, was the Pradhan Mantri Jan Dhan Yojana launched on August 28th, 2014. The move set the foundation for improving financial inclusion by banking the unbanked. The plan saw over millions of bank accounts being created and over billions of rupees being deposited. Then there was the Unified Payment Interface (UPI) which allowed individuals to make payments through a single identification such as an Aadhaar number. This, along with the Bharat Bill Payment System (BBPS) launched in September 2016, was an effort to make digital payments mainstream in the country. Then there was the Income Disclosure Scheme of 2016 that gave tax defaulters an opportunity to wilfully disclose their incomes. While some may have come out clean, the demonetization move has landed defaulters in some serious trouble. All these steps have paved way for a country that is moving towards a digital and cashless economy and the series of moves adopted by the government will clean up the financial system slowly but effectively. It is a well thought of plan; considering the fact that the smartphone user base in the country exceeds 500 million users, moving to a cashless economy would happen faster than expected. To look at things in perspective, KPMG predicts that the transactional value for the Indian FinTech sector is expected to touch approximately $33 billion in 2016 and will reach an astonishing $73 billion by 2020.

The FinTech fraternity in the country could have never been happier. The move ushers an age where digital currency gains predominance over hard cash for the sake of better transparency and traceability. Mobile wallet service providers have seen a surge in user adoption. As liquidity for big currency notes decreases, more and more people will be forced to perform digital transactions for small and medium sized business transactions.

One of the biggest challenges always faced by a tech company offering a product or a service has been to create a need or to get customers to start using their offerings. In the current watershed situation, customers have no choice but to adopt digital cash as the lines outside banks and ATM’s are longer than the ones seen outside Apple’s flagship stores before the launch of a new iPhone.

Some of  the immediate impacts of the demonetization move are:
– Online banking will witness a huge surge.
– The user base for digital wallet services will see a surge of an increase in balance maintained and size of transactions.
– The cost of digital transactions will reduce due to increased volumes traffic at payment gateways will increase multi-fold.
– There will be an evolution in how digital payments are carried out in venues such as toll booths, remittance and payment centers, and purchase points.
– There will be a surge in user adoption for services like credit rating and scoring companies.
So how will these changes impact the digital banking space?

For starters, the increase in online banking transactions will see banking and non-banking financial institutions adopting digital solutions to address the situation at hand. These institutions would expect solutions to have simple and easy to use customer onboarding processes, efficient document capture systems, offline capabilities, enterprise grade security features, and seamless integration with backend systems. Relationship management apps would also be greatly benefitted as there would be more user data available in the system for better profiling of customers in order to provide tailor-made solutions for each customer. With financial inclusion being a major initiative by the current government, agency and door steps banking apps would gain greater prominence as banks strategize methods to tap into customers that were otherwise outside their service network. To ensure that agency banking and doorstep banking apps meet expectations, it is critical that apps must be built with offline capabilities as many of the customers would be at locations with little or no network coverage. Last but not the least; FinTech companies should consider the fact that in a digital world, user experience is king. Solutions developed must be accessible to customers and easy to use, as a large segment of the customer base would not be tech savvy.

Appzillon Digital Banking by i-exceed, is a cutting edge omni-channel solution suite developed with the needs of the bank and its customers at its heart. The solutions are designed to optimize banking operations while revolutionizing the banking experience for both customers and employees alike.
For more info on Appzillon or Appzillon related products, write to us at

Our team would be more than happy to deliver a solution that best suits your needs.