Demonetization has been one of the most uttered word not only in India, but also around the world. Such was the impact, on November 8, 2016 after Indian Prime Minister made a monumental announcement to make 500 and 1000 rupee notes invalid for business transactions. Immediately following that there was a great deal of arguments for and against it as the Indians love to argue:)
Demonetization impact on direct tax collection
It is widely believed that only that five percent of India’s 1.3 billion people pay direct taxes. This paradox made direct tax revenue almost stable at something around 51% of the budget revenue. Demonetization will bring not only cash to the banks, but also individuals who hoarded cash without paying direct tax. The number of new bank account holders will also increase. As a matter of fact it is widely believed that 14 lakh crores had been deposited in the banks. It is not the money, but the tax evaders data will be made available to the banks who in turn will work Income Tax Department, and taxes with penalties will be collected from them.
Demonetization’s impact on Digital Tech industry is enormous because of the following: Demonetization forced people to transact without money, as 500 and 1000 rupee notes were made no longer a legal tender. This situation actually a less cash situation forced people to find newer ways and means to carry on transactions. This opened the new avenue such as online payment portals, payment through banks and e-wallets like PayTm, Mobikwik,SBI Buddy etc.
Less cash- An Imperative
As ATMs are having less cash and serpentine queues people have no option but to take refuge in the convenience of cashless payments and e wallets. Additionally the online marketplace e-Commerce start-ups have seen an enormous surge in registrations and usage. It’s refreshing for them to get paid in advance as against cash on delivery. Most of them are offering further incentives to pay online.
Impact on Information Technology Services
Digital payment as a keyword has been increasing with every passing year. Cashless payment is the new jargon gaining prominence and its popularity is at peak. It will open a host of avenues for interesting startups that are coming up. Slonkit, is an app, which targets parents to enable their teenage children to go cashless. It works in the form of a payment card linked to a mobile application, available on Android and iOS. Through the app, children can learn financial management, budgeting and the art of making the most of their money.
Demonetization will open the doors for banks, insurance companies and other financial service companies to further embrace innovation and new-age payment solutions. One-click payments, near field communications, mobile wallets, banking on the move, Telematics, and IoT related services will all come into prominence. The digital services and underlying application services that IT service firms offer will also undergo a major transformation. The most impacted will be the following areas:
Mobile Design, UI and UX:
As the small markets start accessing financial services through mobile devices, it is imperative that information should be made simple, so that it is understood by all people. Thus, technology and solutions must render easy experience for dealing with/purchasing financial services on mobile. The design, UI and UX teams in sync with technology teams should be able to make mobile apps easily downloadable irrespective of the strength of the Internet connection. This will ensure that ‘last-mile’ reach is attained and ‘financial inclusion’ gets a huge fillip.
Mobile Process Transformation:
A new experience around banking, financial services and insurance may emerge. For e.g.: Telematics would ensure that the entire process of insurance claims undergoes a transformation. It is a mechanism where insurance premium is tightly aligned with driver behavior, usage patterns, time of the day when the car is driven, type of roads frequented, etc. Accordingly, the process of underwriting gets transformed as it is based on monitoring of the car through digital and technology means, storing of this critical data (often using cloud-based storage) and analyzing the data and related parameters to arrive at a very customized insurance premium for cars.
Analytics: Data, opinions, feedback and reviews on social media sites, blogs, forums, micro-blogging platforms, are made available everywhere. There will be major transformation in the way the generated data is consumed. Through various models of predictive analytics, the financial services firms would be able to understand consumers and their behavior better and customize their offerings to enhance loyalty and brand recall.
Enterprise Mobile Applications:
The enterprise applications of financial services must gear up to give a 360-degree view to the customer. They should also render the services seamlessly across all platforms and devices, hence responsiveness would become an important factor. Further, the demand from applications, whether web or mobile, would be to also enable smart segmentation and targeting, positioning services contextually, and manage the web and digital assets seamlessly from an administration standpoint. Digital transformation solutions such as Oracle Webcenter is hence, gaining a lot of traction and is becoming popular among IT decision makers.
There is no doubt that demonetization is a masterstroke by our PM and it will give a huge fillip to nabbing tax evaders, which in turn will lead to cashless economy. It is also fascinating to live this watershed moment in the economic history wherein no economy of the size of India had done demonetization. It will help economists to study for a very long future.