# Spotlight on: Demonetization in India
Author:  Pal Sinha, Barnali 
Author URL: https://financedigest.com/author/pal-sinha-barnali
Published: 2017-06-13
Category: FINANCE
Category URL: https://financedigest.com/category/finance
Meta Title: The Impact of India's Demonetization Policy on Mobile
Meta Description: Discover how Aadhaar and mobile technology are transforming India's economy post-demonetization. Learn about the innovative solutions shaping the digital
URL: https://financedigest.com/spotlight-on-demonetization-in-indiahtml

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_**Sabapathy Narayanan**, Field Marketing Manager, South-East Asia, FIME_

In an unscheduled televised appearance on November 08, 2016, India’s Prime Minister Narendra Modi announced that 500 and 1,000 rupee notes (which accounted for 86% of all currency) would be removed from circulation overnight.

The purpose of this demonetization policy was to promote fiscal transparency, modernise a complex, cash-centric economy and empower social inclusion.

But as one would expect, the impact of such a radical, unexpected approach was immediate and profound. Cash accounted for 90% of all transactions, so the early days of demonetized India were defined by queues at ATMs and an [economically damaging liquidity crisis](https://www.financedigest.com/putin-says-west-is-triggering-a-global-economic-crisis.html "Putin says West is triggering a global economic crisis").

With liquidity stabilising and a more certain picture emerging, however, it is clear that identity, mobile and payments are increasingly converging to meet the challenges of the Indian [digital economy](https://www.financedigest.com/digital-ad-market-shows-signs-of-life-but-economy-clouds-2023-outlook.html "Digital ad market shows ‘signs of life’ but economy clouds 2023 outlook").

**Aadhaar – the enabler of demonetization**

One of the fundamental pillars supporting demonetization in India is the ‘Aadhaar Program’.

Aadhaar is a twelve-digit unique identification number, which contains biometric and demographic data. Uptake has been extraordinary, with [99%](http://timesofindia.indiatimes.com/india/99-of-indians-over-18-now-have-aadhaar/articleshow/56820818.cms) of Indians aged 18 and above having enrolled as of January 2017, making it by far the world’s most advanced biometric identification scheme.

The [importance of Aadhaar in India’s brave new digital](https://www.financedigest.com/eye-tracking-findings-emphasise-the-importance-of-measuring-attention-in-digital-advertising.html "Eye tracking findings emphasise the importance of measuring attention in digital advertising") economy cannot be underestimated. This is because it can be used as the sole means of identity verification when accessing financial services, removing the key barrier for India’s unbanked population. Already, over [270 million bank accounts have been opened](http://www.bobsguide.com/guide/news/2017/Jan/30/indias-cash-crisis-is-a-short-term-pain-for-a-long-term-gain-interview-with-amit-dua-executive-vp-of-suntec/) using Aadhaar.

**Leaders of the mobile world**

This wider and [simplified access](https://www.financedigest.com/alloy-partners-with-fiat-republic-to-democratize-fraud-free-crypto-trading-and-simplify-fiat-access.html "Alloy Partners with Fiat Republic to Democratize Fraud-Free Crypto Trading and Simplify Fiat Access") to financial services is coupled with an increasingly advanced mobile infrastructure. India boasts the [highest global mobile per capita rate](http://www.trai.gov.in/sites/default/files/Press_Release_11_17_Feb_2017_Eng_0.pdf), and it will [lead the world](http://www.livemint.com/Industry/SNCIRWCmkP3kPIhO2jIXgO/India-to-lead-global-growth-of-smartphone-connections-GSMA.html) in smartphone adoption between 2016-20. Mobile data usage will also [increase fivefold by 2021.](http://economictimes.indiatimes.com/tech/internet/mobile-data-use-per-person-in-india-to-jump-fivefold-by-2021/articleshow/52638180.cms)

Consequently, the Indian mobile wallet market is set for [148% growth between 2017-22, accounting for $4.4 billion in transactions](https://www.mobilepaymentstoday.com/news/report-india-mobile-wallet-market-on-the-rise/). Indeed, we are already seeing considerable innovation across mobile [payments](https://www.financedigest.com/the-future-of-mobile-payments-and-e-wallets.html "The Future of Mobile Payments and E-Wallets") and the emergence of a sophisticated mobile payments infrastructure.

For example, the National Payments Corporation of India (NPCI) – an umbrella institution for all retail payment systems designed to facilitate affordable payment mechanisms in the country – has developed its Unified Payment Interface (UPI) platform. UPI is a payments [application that enables users](https://www.financedigest.com/industrial-catalytic-converters-market-competitive-growth-strategies-based-on-type-applications-end-user-and-region.html "Industrial Catalytic Converters Market Competitive Growth Strategies Based on Type, Applications, End User and Region") to transfer and transact using just a mobile number, dedicated UPI address or Aadhaar ID.

We also [expect several HCE-based mobile wallet solutions to emerge](https://www.financedigest.com/global-fuel-injector-cleaner-market-emerging-economies-expected-to-influence-growth-until-2031.html "Global Fuel Injector Cleaner Market: Emerging Economies Expected to Influence Growth until 2031") as a quick and cost-effective means of delivering mobile payment services. In the absence of hardware security, however, the security of cardholder data is integral to ensuring [consumer confidence](https://www.financedigest.com/asian-shares-rise-after-consumer-confidence-boosts-nasdaq-to-record-high.html "Asian shares rise after consumer confidence boosts Nasdaq to record high") and driving adoption. Compliance with industry standards such as PCI DSS, therefore, is key.

In parallel, the [strategic and commercial importance of the Indian market](https://www.financedigest.com/anti-snoring-devices-and-snoring-surgery-market-strategic-analysis-to-understand-the-competitive-outlook-of-the-industry-2024.html "Anti-snoring Devices and Snoring Surgery Market Strategic Analysis to Understand the Competitive Outlook of the Industry, 2024") means the ‘OEM Pay’ platforms will undoubtedly have a role to play. [Samsung Pay has already launched](https://www.finextra.com/pressarticle/68561/samsung-pay-arrives-in-india), and we can surely expect similar announcements from the other technology giants.

**Meeting terminal demand**

The demonetization process, in parallel with the ongoing EMV®\* migration, means that the merchant community is embarking on the huge task of upgrading the acceptance infrastructure nationwide.

For India’s terminal manufacturers, this [expanding market](https://www.financedigest.com/automotive-light-bars-market-expanding-at-a-healthy-5-3-cagr-the-market-size-is-projected-to-total-us-1-3-bn-by-2029.html "Automotive Light Bars Market expanding at a healthy 5.3% CAGR, the market size is projected to total US$ 1.3 Bn by 2029") is an unprecedented opportunity. But they must [move quickly](https://www.financedigest.com/zeal-to-move-through-settlements-anew-to-drive-the-individual-quick-freeze-fruits-market.html "Zeal To Move Through Settlements Anew To Drive The Individual Quick Freeze Fruits Market"). [Tax exemptions](http://eprretailnews.com/2017/03/22/47892-cashless-drive-will-push-indias-retail-sector-to-new-high/) for domestic manufacturers are incentivising entry into this increasingly lucrative space, and governmental regulation to [relax certification requirements](http://eprretailnews.com/2017/03/22/47892-cashless-drive-will-push-indias-retail-sector-to-new-high/) for imported POS terminals will foster further competition from overseas.

Accelerating time to market is key to [meeting demand](https://www.financedigest.com/britains-national-grid-expects-to-meet-electricity-demand-this-winter.html "Britain’s National Grid expects to meet electricity demand this winter"). [Manufacturers and developers](https://www.financedigest.com/automotive-mems-sensor-market-key-manufacturers-development-trends-and-competitive-analysis-2028.html "Automotive MEMS Sensor Market Key Manufacturers, Development Trends and Competitive Analysis 2028") may therefore want to work with local partners to streamline the certification process for their solutions.

**Getting to the next level**

Let us be clear. Demonetization in India is a policy of extraordinary scope and ambition, combining advanced solutions across identity, mobile and payments to revolutionize [commerce and financial services](https://www.financedigest.com/e-commerce-fulfillment-services-market-to-reflect-impressive-growth-rate-to-during-forecast-period-observes-tmr.html "E-commerce Fulfillment Services Market to Reflect Impressive Growth Rate to During Forecast Period, Observes TMR") across the nation.

It is imperative, therefore, that local [players upgrade their knowledge and work with the right partners](https://www.financedigest.com/gumgum-and-jw-player-partner-to-integrate-viewability-and-advanced-contextual-capabilities.html "GumGum and JW Player Partner to Integrate Viewability and Advanced Contextual Capabilities") to assess and analyse the changing landscape to enable them to make the right decisions swiftly, now and in the future.

[FIME](https://www.fime.com/#utm_source=iseepr&utm_medium=blog&utm_campaign=demonetization) _has over 20 years’ experience in brining innovative technologies to market quickly and efficiently._

_It has developed a comprehensive offer of consulting services, technical training, technology design, test tools and certification testing. Its experts support projects from start to finish, resolving the technical [challenges posed by implementing a complete portfolio](https://www.financedigest.com/investors-reorient-portfolios-amid-macroeconomic-challenges.html "Investors reorient portfolios amid macroeconomic challenges") of specifications, standards and multi-brand industry requirements._

\\* EMV is a registered trademark in the U.S. and other countries, and is an unregistered trademark in other countries, owned by EMVCo.


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