The Indian government caught everyone by surprise yesterday when it announced that ₹500 and ₹1,000 currency notes will not be considered legal tender after midnight. This hard step has been taken to curb the use of black money.
In a live television address, Prime Minister Narendra Modi announced that all ₹500 and ₹1,000 notes will have to be deposited in banks or post offices and exchanged for new denominations of ₹500 and ₹2,000 or the old denominations of ₹10, ₹20, ₹50 and ₹100.
Many have welcomed the decision but perhaps the loudest cheer was heard from companies handling online payment systems.
Vijay Shekhar, the founder of PayTM, showed his support for the scheme instantly on Twitter. The company's traffic has increased upto 435% percent after the announcement yesterday. There is also an increase in terms of app downloads by 200%
Among the steps making online wallet systems happy is today's bank holiday for the general public, and the fact that most ATMs will be inoperative for the day.
So, from ordering food to taking cabs, to buying groceries, usage of online wallets will go up. One of India's prominent online wallet, Mobikwik, has already seen a 7x increase in transactions since this morning.
"The announcement of the discontinuation of ₹500 & ₹1,000 notes is a mind blowing initiative taken by Prime Minister Narendra Modi to curb black money in India," Bipin Preet Singh, CEO of MobiKwik, said. "This is the biggest surgical strike on the menace of cash ever heard of anywhere in the world. Within a 50 day period, a billion Indians will change their payments behavior -- we will move from cash only to a cash-free economy. This a strong step taken by the Modi government and will benefit the growth of digital payments and digital banking in India. We are excited to be a part of this historic moment."
The company is already offering to exchange cash for balance in its wallet until 30 December. It is also willing to send its executives to people's doorsteps to get the older denominations of ₹500 and ₹1,000.
Bhavish Aggarwal, CEO of OLA cabs, which has its own e-wallet system for payments, also welcomed the government's move. "As a nation, this is our first major step towards a cashless economy, bringing convenience and transparency for every Indian," he said in a statement. "This move is integral in realizing our shared vision of a Digital India."
In order to enable a smooth transition over the next few weeks, the government has placed some restrictions on the currency exchange process. For instance, for the first few days, one can only withdraw ₹2,000 per day from the bank. This limit will go up to ₹4,000 subsequently. The weekly limit for the withdrawal is ₹20,000 by cheque and demand draft. So in those cities where on-demand cabs are available, people will prefer traveling cashless instead of spending money on a rickshaw or any other mode of transport.
"We welcome the Government's bold and courageous move to weed out black money, which will have significant long-term benefits for the economy," Kunal Bahl, Co-founder & CEO Snapdeal, which owns the online wallet FreeCharge, said in a statement. "With this, the quantum of India's economy moving through the digital pipes will witness massive growth. Both Snapdeal and FreeCharge are committed to supporting all such initiatives." Freecharge saw a jump of almost 12x in the transactions today.
"This is a master stroke by the BJP government and a very bold move indeed," Sanjay Sethi CEO of Shopclues said. "Even though this is not the first time such a move has been made by a sitting government, what is significant this time is that it is built on the JAM trinity – Jandhan, Aadhar and Mobile – making it hard for the country to regress."
Meanwhile, many delivery websites such as Swiggy, Zomato, Amazon, and Flipkart have dropped the the cash on delivery option for the moment.