Prime Minister Narendra Modi’s surgical strike on black money will have a collateral damage for online logistics companies. Most courier boys accept cash on delivery (CoD) on behalf of e-commerce companies and deposit at various hubs in the evening. The payments for high value items are generally done through notes of Rs 500 and Rs 1000.
Warburg Pincus funded Ecom Express said that there will be a temporary impact on the logistics sector for CoD. “It will last only till the liquidity in the market improves,” said TA Krishnan CEO of Ecom Express.
Jabong is said to have a late night call with eKart as courier guys confused on what to be done with cash collected till now.
Almost 60 percent of the e-commerce retail happens on CoD basis in India. Most of the orders under the electronics and appliances category have an average value of Rs 4,500 and above. Temporarily, e-commerce logistics is said to have been impacted and people can expect late deliveries for high value CoD orders.
In case of high value items, buyers can expect stoppage of CoD by e-commerce companies for a few weeks. Food tech and hyper-local services are also going to be impacted temporarily as they accepted cash orders.
Taxi hailing startups such as Ola and Uber already accept both cash and wallet as payment mode and are likely to gain rides as people expected to pool and rideshare through wallets.
However, India’s e-commerce companies echoed a positive sentiment towards Modi’s sudden move. “We welcome the Government’s bold and courageous move to weed black money, which will have significant long term benefits for the economy. With this, the quantum of India’s economy moving through the digital pipes will witness massive growth,” said Kunal Bahl, Co-founder & CEO Snapdeal.
“Both Snapdeal and Freecharge are committed to supporting all such initiatives,” Bahl added
Digital Currency to gain in India
Social media was abuzz after PM Modi announced ban on the Rs 500 and Rs 1000 notes. Taking advantage of the situation various e-wallets started tweeting to gain more visibility among panicked netizens.
India’s largest digital wallet company Paytm tweeted: “We have got two words for you: Paytm Karo.”
Mobikwik ran another marketing campaign with cashbacks to counter Paytm and tweeted:
MobiKwik comes to rescue! Add Money & get upto Rs 100 cashback.
Delhi based Oxigen tweeted:
Breaking News: ATMs & Banks are shut down for 2 days! Not So Breaking News: Oxigen Wallet #KaamAayega!
“This is the golden age to be a tech entrepreneur in India. Specially a FinTech one!,” tweeted Vijay Shekhar Sharma, CEO of Paytm, which will gain more downloads in coming days.
Fintech startups are the most to gain with Modi’s surgical strike against black money. VC money in such startups is likely to flow in the coming weeks, as more people are likely to adopt digital wallets.
‘It is a great move to curb money laundering and counterfeiting. This will mark the beginning of digital currency era and bitcoins have a huge potential to grow and eradicate black money totally out of the system. We foresee immense movement in our space’, said Mr. Saurabh Agrawal, CEO and Co-Founder, ZebPay.
Cost of printing money and transactions is also expected to go down.
“This is a promising move made by the government towards cashless economy. This will boost innovation in the nascent electronic payment industry. A great blow to black money. If executed well, the costs of doing transactions between buyers and sellers will lower significantly by 2019,” says Manavjeet Singh, CEO & Founder, Rubique.
Sharma of Paytm said that he wants to have 500 million users before any IPO plans for the e-wallet.
Fintech startups pitch alternatives to black money
Some fintech startups have already started pitching their own products as alternatives to cash.
“The intentions are good but very difficult to achieve. If going cashless is the only way forward, certainly the bitcoin which is borderless trustless and transparent currency makes more sense,” says Sathvik Vishwanath, CEO and Co-founder, Unocoin.
Those who wish to take a loan will have to show a solid credit history than stashing black money into gold deposits.
“Sweeping step taken by the PM, but this should have a positive impact in curtailing black money and reducing corruption. Likely to cause some temporary hardship, and with the introduction of the Rs 2,000 note, along with the security and tracking features, currency will be used as intended,” Ranjit Punja, CEO & Co-founder, Creditmantri.
However, a lot of black money which was being routed in Indian startups will also stop.
Temporary hardship for cash heavy sectors and rural rich
It’s not an unknown fact that in India, the number of bank branches and ATMs in small towns is dismal. As per an IBEF report, number of ATMs per million population is expected to touch about 300 in 2017. India has about 30 bank branches per 1000 sq km compared to UK’s 53 branches.
“There is likely to be a negative impact on sectors with high cash economy in the immediate term. Sectors like Real estate, construction material, unorganized trade and services will see significant pain in the near term,” says Amit Sachdev- Co-founder and CEO, CoinTribe.
Often small town citizens keep cash at home as nearest ATMs or banks are miles away.
“With liquidity drying up, both NPA and demand for working capital credit are likely to go up. In the long term, though, this is likely to drive several benefits for the economy. India has made the first move from cash economy to a digital economy,” he adds.
Farmers and construction workers who used to keep cash at home after a hard day’s work, will be forced to open bank accounts and deposit cash. Will it prove to be a backlash for Modi in upcoming elections in Punjab and UP – only time will tell.
“Biggest gamble by Mr. Modi – banning Rs 500 and Rs 1000 notes. What happens to Bharat with 46 percent unbanked population? Is RBI geared for this? Will it derail manufacturing recovery which is in early stage?,” says Satyam Kumar, Co-founder of Loan tap.
