Cash was the king for most until November 8 last year when the PM demonetised older Rs 500 and Rs 1000 notes
In Pic: Deepak Verma, 48, a businessman, wife Aruna Verma, 47, a homemaker, and son Mayank Verma, 26, who works in the private sectorMost of the Vermas’ expenses were in cash. Demonetisation dented their spending while roiling the family business. Spendings have clawed back with a marginal shift to card and e-wallet, mostly driven by son Mayank
Cash was king — until November 8, for the Singh family in Delhi. “We believed in keeping a lot of cash at home,” says Priya Singh, 31, a private sector executive. So the family of three — her homemaker mom Shobhana Singh, 56, and father Rama Ranjan Singh, 57, a private sector executive — would withdraw about Rs 15,000 every week.
“We had debit and credit cards. But we believed that cash is for everyday use and cards are for emergency,” adds Priya. The withdrawal of Rs 500 and Rs 1,000 notes in early November shook things up. The first two weeks were tough. The Singhs slashed expenses. They picked stores like Big Bazaar, ignoring the for long friendly-neighbourhood kirana stores. Close to three months now, their approach to cash has dramatically altered. “Now cash is for emergency. And we often ask why do we need to spend in cash if we can pay by card or an e-wallet,” says Priya. It helps that the kirana stores and even the roadside vegetable vendors have begun to adapt. Shobhana used mobile wallet Paytm to get her watch fixed last week. After being used to cash all her life, she now mostly uses a debit card and Paytm for small expenses like vegetables.
“Initially it was difficult but now I find it convenient that I do not have to carry cash with me,” adds Priya’s father Today, the mode of payment often dictates where the family shops. Recently Priya had to pick up flowers, but her florist would not accept a card or ewallet. So she changed her florist.
“Now the first question I ask when I am out shopping is whether cards or e-wallets are accepted. If they don’t, I prefer to buy elsewhere,” she says.
The jury on the impact of demonetisation is still out. Many of its intended consequences remain suspect. With 97% of the demonetised Rs 500 and Rs 1,000 notes back in the system, unearthing black money or even fake currency remains a pipe dream. Instead, GDP growth forecast has been revised downwards even as businesses are hurting and job market look tight. But what is beyond doubt is that in a country where 97% of all retail transactions happened in cash, demonetisation has significantly impacted Indian consumers and their shopping behaviour.
Sales dips in key categories like FMCG, cars & bikes, luxury goods and mobile recharge offer some clues. But a granular-level understanding of those shifts is not yet available. A face-to-face survey done by research consultancy firm Kantar Millward Brown — exclusively available to ET Magazine — throws some light on the shifts in purchasing patterns.
The study was done in the last two weeks of December among 2,000 odd consumers in the SEC A & B households and it delved deeper into three important consumer segments — housewives, working males (normally the head of the house) and digitally-savvy young Indians. The study reveals that 32% of all consumers admit that their long-term big purchases like cars, bikes have got impacted. But what is more interesting is the short-term day-today expenses where different segments have responded differently with varying impacts, says Anand Parameswaran, vice president, Kantar Millward Brown. Housewives have been the worst impacted. Often in charge of regular household expenses from ration to fruits and vegetable, and with limited access to electronic cards, this category of consumers scaled back their spends the most (by 80%) on day-to-day expenses. For the working male, the dip stood at 65% and for the digitally-savvy young Indians it stood at 60%.
Beyond Cash
All the three categories of consumers recalibrated their relationship with cash. The impact, though, was wide-ranging. For instance, some 66% of housewives say they cut down on expenses for regular near-term purchases, 20% changed their payment mode, opting for cashless transactions, and just 10% reported no significant impact.
“Psychologically, housewives find dealing with new technology a barrier. They are also uncomfortable dealing with intangible forms of money,” says Santosh Desai, CEO, Future Brands. This category was the slowest in adopting cashless forms of payment. Pre-demonetisation, while 95% paid by cash with card payment at a low 3% and digital wallets at 1%, after demonetisation cash payments dipped to 77%, card usage went up to 18% and digital wallets inched up to 5%.
While kirana stores were the most affected, supermarkets were the biggest gainers. In contrast, 67% of working males (normally the head of the family and main bread earner) said they would prefer to switch to cashless modes of payments. It led to the rise in their usage of cards (from 30% to 37%) and ewallets (4% to 8%) post demonetisation. The sharpest shift is visible among the young digitally-savvy users 94% of whom said they would prefer to switch to cashless modes of payments.
And their usage of cards (from 32% to 41%) and digital wallets (from 13% to 30%) for regular purchases went up the sharpest. This maps well with the latest data released by the RBI. Despite such a huge cashless push post demonetisation, the volume of point of sale transactions in debit and credit cards slipped from 229.31 million in October to 205.5 million in November and 238.7 million in December.
In value terms, from Rs 511.21 billion in October, transactions went down to 352.4 billion in November and Rs 397.1 billion in December. For prepaid instruments or e-wallets, volume of transactions slipped from 126.9 million in October to 59 million in November and 72.2 million in December. The value of transactions dipped from Rs 60.22 billion in October to Rs 13.2 billion in November before inching up to Rs 17.5 billion in December.
There are around 120 million e-wallet users in India today. Roughly, 80 million users are digitally-savvy under 25 years with an average monthly spend of Rs 200, says Naveen Surya, MD, Itz Cash, an e-wallet company. About 20 million are people in the 25-45 age category whose monthly transaction would be between Rs 500 and Rs 1,000. The rest are those in the 25-55 age bracket, people like taxi drivers, contract labour, the unbanked segment that uses ewallets to send money home.
“In value terms, this segment has been the biggest user of e-wallets,” says Surya. But post demonetisation, “the growth in e-wallet usage is being primarily driven by young (mostly 18-40 years) well-heeled urban smart phone users,” says Amit Goel, cofounder, Let’s Talk Payment, a fintech insight platform.
The survey bears Goel out. “For the youth, who have grown up with technology, the openness to try new thing is high. Also they have a high self-learning ability,” says Desai. As the cash crunch eases, how much of these changes will stick? For the younger lot, the transition will be easier and more permanent.
As in the case of Kunal Dutt, 25, a Gurgaon-based private sector executive, who is now a total convert to the cashless world. While he uses a credit card for most big expenses, his e-wallet comes handy for small daily expenses. He now rarely uses cash. “I think demonetisation has had a good impact. Cashless payment is good and convenient,” he says.
For the older lot, the journey to the cashless world will be not be such a predictable straight line. Kunal’s homemaker mother Vinita, 51, who began shopping at Big Bazaar with her debit card, is now back to the cash world, buying her groceries from the neighbourhood kirana store. “There are a lot of frauds happening with cards and e-wallet these days. I don’t feel very comfortable using them,” she says.
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