On Tuesday night, Indians were left scrambling as Prime Minister Narendra Modi, in a surprise address to the nation, announced the scrapping of Rs 500 and Rs 1,000 currency notes. There was a mad dash to withdraw smaller bills, or deposit bigger ones, at automatic teller machines around the nation before they shut down temporarily.
Finance Secretary Ashok Lavasa clarified that ATMs across India will reopen on Friday. Until that time, old notes would continue to be accepted at government hospitals, railway ticket counters, milk booths, petrol stations, crematoriums, and by public transport undertakings and airlines.
Amidst this confusion, if there was a clear winner, it was the class of startups offering online wallets and digital payments.
Following Modi’s announcement, Paytm’s traffic, for instance, increased by 435% and its downloads by 200%, according to Next Big What. Paytm is India’s leading mobile wallet startup – it allows users to make transactions “at 850,000 places across 1,200 Indian cities, including kirana stores, branded retail outlets, paan shops, and petrol pumps”.
Paytm founder Vijay Shekhar Sharma was, predictably, gleeful in an interview:
“We saw a huge spike in new users after the decision was announced. I believe that our dream run is going to start now, and so we are preparing ourselves to put extraordinary efforts in the next few months to make sure that we are available in every nook and corner of India, which is a big task.”
Paytm even advertised in newspapers, congratulating Modi on the demonetisation, calling it the “boldest decision in the financial history of independent India”.
Like Paytm, FreeCharge, a payments app, reported a 12-fold rise in usage across India, hours after Modi’s announcement. It is now offering a cashback of Rs 50 on a charge of Rs 500 to the Freecharge wallet.
Kunal Bahl, co-founder and CEO Snapdeal, which owns FreeCharge, tweeted: “Cash on delivery to be a thing of the past very soon. Expect massive adoption of digital payment systems like @FreeCharge in place of cash!”
According to Huffington Post, Mobikwik, a mobile wallet and online payment system, saw a seven-fold rise in transactions since Wednesday morning. Bipin Preet Singh, CEO of MobiKwik, said:
“The announcement of the discontinuation of Rs 500 and Rs 1,000 notes is a mind blowing initiative taken by Prime Minister Narendra Modi to curb black money in India. 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 behaviour – we will move from cash only to a cash-free economy. This is 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.”
There were several others who benefited, even if temporarily.
Ola Money, the digital payment arm of the taxi aggregator Ola, reported a 1500% increase in recharges across 102 cities after Rs 500 and Rs 1,000 banknotes were demonetised. It was offering extra money on recharges, available for short windows through the day.
Meanwhile, e-tailers such as Flipkart temporarily disabled their “cash-on-delivery” option, urging customers to opt for alternative payment modes such as internet banking, credit and debit cards, gift cards, unified payment interface and wallet payments solutions.
“In view of new measures introduced by the Government of India, Flipkart will not accept CoD payments (cash-on-delivery) in old Rs 500 and Rs 1,000 notes effective November 9, 2016,” Flipkart announced. “New Rs 500 notes issued by the Reserve Bank of India after November 10, 2016, will be accepted after they become available.”
Making use of the opportunity, a few companies extended cashback offers on online transactions.
A few companies went out of their way to help customers stock up on essentials or use leftover currency notes before the Tuesday night deadline.
Gold was a winner in the end, with prices surging by Rs 900 from Tuesday, to a three-year high of Rs 31,750 per ten gram.
"The bullion demand has got a boost as people having huge funds in cash, were seen converting their wealth into gold as a safe-haven," Rakesh Anand, a jeweller in Delhi, was quoted as telling Press Trust of India.