Banning Rupees Didn't Work. This Might

The technological nudge thats making mobile payment easier and could bring more Indians into the financial system

- Saritha Rai & Anto Antony

Venkatesh Munivenkatappa runs his roadside stall in the Koramangala neighborhood of Bengaluru, formerly known as Bangalore, with help from a mobile phone loaded with digital payment apps. Customers can buy his colorful sandals and handcrafted shoes and belts using Google Pay, WhatsApp Pay, Paytm, PhonePe, and an app promoted by India’s central bank called Bharat Interface for Money, or BHIM.

“I never want to turn customers away, no matter which app they use,” Munivenkatappa says. The apps make him feel less vulnerable to theft, he adds, because he doesn’t have to keep a lot of cash on hand.

For India’s government, this is a much-needed sign of progress. It’s been trying to move the country of 1.3 billion people away from depending on cash, and its approach has often been heavy-handed.

Two years ago, Prime Minister Narendra Modi suddenly banned most bills of India’s paper currency overnight, triggering chaotic scenes as people lined up outside banks and ATMs to turn in old notes or get new ones. The government justified the move, known as demonetization, mainly as a way to crack down on corruption. The idea was to render stashes of ill-gotten cash worthless, while at the same time jolting people into using bank accounts and digital payments. In fact, almost all the old bills were returned, suggesting very little so-called black money was rooted out.