How E-commerce And FinTech Players Have Been Fairing Post The Note-Ban

India is a country which has population of 1.25 billion, approximately 660 million debit cards and 25 million credit cards. In theory, the country is almost ready to go cashless, but where it lacks is the point of sales solutions terminals that stand at only 1.5 million.

In a scenario where there is lack of basic infrastructure, Government's decision to demonetize Rs.500 and Rs.1,000 denomination notes could have resulted in a situation of helplessness and chaos.

However, thanks to the growing acceptance of digital payments and surge in mobile phones sales, smartphones emerged as a virtual point of sales solutions with e-commerce biggies like Snapdeal, Flipkart, Shopclues, among others, witnessing an uptick in the demand and usage of digital payments over the last seven days.

While demonetization is definitely a promising move for the FinTech companies and the startup economy as a whole, it is going to bring about a sea of change in the way Indians transact.

Alibaba-backed Paytm, which offers both mobile payment platform and e-commerce marketplace, said it is now witnessing about 7 million daily transactions worth about Rs. 120 crore. With people being compelled to switch to non-cash mode it seems like at least some companies have successfully achieved their third-quarter targets before-hand.

Upasana Taku, Cofounder, MobiKwik spoke about the effect of the big announcement, "To promote adoption of wallets, it also announced 0 per cent TDR for merchants and free money transfer to any bank account." The platform has registered 7000 per cent increase in P2P and bank transfers, 2500 per cent jump in overall traffic especially due to 'Nearby' feature introduced to identify food and shopping outlets around, registering an increase in app downloads close to 200 per cent and an 18x surge in transactions.

But the effect on E-commerce companies is expected to be different. The very next day post demonetization role out of the note ban, Amazon and Flipkart decided to remove the CoD mode of payment. Whereas, Snapdeal considered continuing with the facility after releasing a notification that they will not accept Rs.500 & Rs.1000 notes. Similarly, Shopclues stuck to not providing CoD on orders worth Rs.1000 and above.

The move is surely to affect the business of e-commerce players in India for the next few days as a large portion of their orders are CODs. The companies, however, are unanimous that this will help them improve margins over the long term. The proportion of CoDs makes for almost 80 per cent of sales for some.

An executive at Flipkart said that this move will prove to be a significant moment for all internet-based companies. "Of course, CoDs will go down further, in line with our broader plan to push for more online payments. This will bring more efficiency in terms of cost-per-delivery and make online payments more acceptable to newer and existing users." They didn't comment on their traction since Nov 8.

In the short term, there will be an impact on COD orders, but with new currency coming in that should be tackled soon. The story is however, a little different for the FinTech players like Paytm, SpiderG, Bankbazaar.com, Fair scent, Landing Box had appreciated the government's effort to smoother the formal banking system and create a transparent order of affairs.

Ekmeet Singh, founder of Lending Kart said, "Our economy has become a savings economy rather than a spending economy since the past few days. We have been observing a drop in the online traffic as well as in the interest of the lenders on our platform. There has been a surge of 40-50 per cent in the number of borrowers but the reason is that intuitively the trend after demonetization has been altered. It is expected to stay that way till December 30, however the newyear hopefully will be better. "

On the similar lines Rajat Gandhi of another C2C platform 'Fairscent' commented, "There has a decrease in the registrations of the lenders nearly 20-25 per cent, however the number of borrowers has been fairly on the rise. Nearly 40-50 per cent borrowers have been attracted to our platform post the note-ban."

While people are gaining a lot of awareness on paying taxes, the electronic payment techniques are still at a nascent stage. Disrupting the grey cash economy is one thing but at present there is a huge gap in the way Indians shop and transact for any other services.

Though the note-ban has been considered a serious step in helping the banks as they have long been struggling to meet the requirements of Tier2 and Tier 3 cities and it is accepted as the smartest routes to drive growth in India's startup economy, as now new sources of funding from angel investors would open up and even micro-Vc's would be able to participate more, there is no denying that the GDP would be drastically affected since the offline and online businesses cycles have been disturbed big time.