The Indian government surprised by cancelling the country’s INR500 ($7.50) and INR1,000 bank notes, an anticorruption move intended to promote digital payments.
The move by Prime Minister Narendra Modi swept away 86 per cent of the country’s banknotes by value and is meant to drive users to open bank accounts with the intention of boosting tax revenues. India is still predominately a cash-based economy.
Mobile payments firm Paytm reported a surge in traffic and downloads of its app. The company saw a 1,000 per cent jump in money added to its mobile wallet, 200 per cent increase in app downloads and 250 per cent growth in transaction value, according to Bloomberg.
Meanwhile, Vodafone India issued a statement welcoming the government’s move, describing it as “a bold step to accelerate India’s progress into a less cash economy”. The operator intends to play a major role in the process via the rollout of its M-Pesa service, it said.
In retrospect, the Indian government has been preparing the ground for such a radical move. For instance, the Reserve Bank of India issued 11 provisional payments banks licences in August last year. Payments banks are designed to draw those users currently outside the financial system to open bank accounts. Mobile operators were among the winners of those licences.