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Startups Stood Up

Demonetisation pushed the informal sector into the formal economy and acquainted it with digital payment options. Mobile wallets, for instance, laughed their way to the bank

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On 8 November 2016, Prime Minister Narendra Modi announced demonetisation of Rs 500 and Rs 1,000 banknotes of the Mahatma Gandhi series as an onslaught on corruption and ‘black money’. The immediate aftermath of the measure was a cash crunch that stung many manufacturing and services industries. An immediate beneficiary was Digital India, especially e-wallet players like Paytm, e-banks and ecommerce companies.

A year later, though, the Indian startup ecosystem, where most of these companies come from, is still unsure of the extent to which demonetisation has changed their world. Those who were already part of the digital economy, felt less pain than those who were averse to it. “The past one year has been particularly great for The Mobile Wallet (TMW), as we have charted our own path of exponential growth even after the economy has been remonetised. We are seeing a month-on-month rise in digital payments on our platform,” says Vinay Kalantri, Founder and Managing Director of TMW.

“As soon as demonetisation was announced ClearTax sprang into action to resolve queries and be a source of the latest and correct information,” says Archit Gupta, Founder and CEO of ClearTax, an online tax filing portal. “Our tax filing stats saw a significant growth for FY2016-17 (when 1.5 million tax returns were filed till September). The overall outlook has been positive,” says he.

The demonetisation exercise was followed by a mega public education initiative on digital payments and a “Less Cash Society” by the government. “The success of India’s cashless journey needs two key ingredients — increased consumer awareness and larger acceptance network. However, this masterstroke from the government is successful because of us, the people and the masses have now understood the (impact of) demonetisation to a certain extent,” says Roma Priya, Legal Advisor and Founder of the startup law firm, Burgeon, which provides legal services for entrepreneurs.

Demonetisation compelled the unorganised logistics industry to adopt digital payments. “Now GST and E-Way bill regulatory will ensure the movement of a majority of the logistics industry to the organised sector,” says Anjani Mandal, CEO and Co-Founder, Fortigo Network Logistics.

A definite beneficiary of demonetisation were healthcare services, which were not only pushed towards  online payments, but also a faster payment cycle, which in turn, translated into transparency and efficiency. The money flow into the sector is now transparent, leading to better accounting and clearer reporting, helping to erase grey transactions. “I believe once the remonetisation is fully implemented, there will be a huge control on malpractices in terms of cuts/kickbacks that healthcare is plagued with. Organisations and individuals will be forced to stop the malpractices and finally the consumer will get the benefit both in terms of quality as well as cost,” says Vipin Pathak, Founder and CEO, Care24, which provides healthcare services of nurses and physiotherapists at the doorstep.

Hit By The Demon

Etailers, though, were as much hit by demonetisation as the rest of the consumer retail sector. “The quarter following demonetisation saw our biggest financial low but as always, we managed to turn that into an opportunity to innovate and restrategise, says Ashish Goel, Founder and CEO of Urban Ladder, which sells furniture online. “Going forward, our omni channel strategy will help in safeguarding us against such economic anomalies. We’ve just had one of the best quarters as a company and so in the long run, demonetisation has worked in our favour,” says he.

Siddharth Devnani, Co-founder and Partner at the full service marketing agency, SoCheers,  speaks for the marketing sector, when he says, “The entire business community took a hit on cash flows during demonetisation, which led to a marginal decrease in media buying across the industry. Besides this, our organisation was not affected at all.’’

Initially, demonetisation adversely impacted EMI repayments, leading to high delinquencies and collection cost, recalls Rachit Chawla, Founder and CEO, Finway Capital. “However, over a period of time it has benefitted the entire sector with a stable asset quality,” says he, “as more businesses have become transparent and are seeking organised sector funding.”

Among the sectors of the informal economy that demonetisation dragged mainstream, is the renewable energy sector. “At Artha Energy, we believe that demonetisation has helped the renewable energy sector as formal sources of capital have increased. The weakness in the real estate sector and bullion has driven and resulted in much of that money flowing to equities, debt and renewable energy," says Animesh Damani, MD, Artha Energy Resources.

The biggest gain from Demonetisation has been informal sector getting into formal economy and enhanced need for digital solutions. "Our business has grown over 300% in the past year, a big chunk of that is thanks to Demonetisation," adds Sandeep Mathur, MD, Lyncbiz Corporation.

Demonetisation was a “welcome move,” says Javed Tapia, Founder of Slonkit, which is India’s first money management app. It had, he pointed out, added more impetus to the goal of promoting digital and electronic payments than any other previous initiative.




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