|Photo: Kathryn Cave|
|Photo: singh_lens / Shutterstock, Inc.|
The stated aim was to eradicate black money – a big problem when only an estimated 1% of the population pay income tax. Yet in a country where the majority are still unbanked, it has also proved to be a clear move towards the greater use of digital currency. (BBC Radio 4 produced an excellent overview documentary on this on 26th January titled ‘The Briefing Room: India’s Bonfire of the Bank Notes’.)
This demonetisation was a vast sweeping measure. It equalled 86% of the value of the currency and 25% of all actual banknotes. And while it got nowhere near as much media coverage around the world as it would from a more developed market, scenes of queues outside cash machine were widely broadcast.
Many of the problems arose because although people diligently took their old currency into the banks, no new notes were forthcoming. This was compounded by a general ongoing shortage of working ATMs which left many individuals with absolutely no money.
“The country responded well,” says Harold Montgomery, Chairman and CEO of MoneyOnMobile – which allows for easy digital money payments via SMS – when I meet him for a coffee in London. People were “surprisingly docile”, especially when you consider how people would react in countries like the US, France, Germany or the UK.
However, he says “if you did it the western way [i.e., with plenty of warning and government advice on how to prepare] you’d miss a lot of the point.” This would give the more nefarious elements of society time to get rid of their black money. “It’s not clear corruption goes away because you clobber people one time [though],” he adds.
MoneyOnMobile is one of a cohort of payment companies which are working to tap into the growing digital payment market in India. Montgomery previously worked with digital payments in the US, discovered the Indian opportunity in 2011 and started building investment in 2012. [It raised an initial $10M in venture funding and $1.5M in debt financing last year.] “We’re 100% dedicated to the Indian opportunity,” he says.
Source: IDG Connect