Digital wallets for all?

In 2016, the logic of “demonetisation through digitalisation” was advocated to support India’s move to a cashless economy. Street sellers in Bengaluru, on the other hand, illuminate the challenges of running their businesses in post-demonetisation times.

“It still won’t go through”. By his stall selling vegetables in a large street market in Bengaluru, Anil shows us the outcome of yet another attempt for a customer to pay produce with their phone, through one of the digital wallet systems popularised in the last few years. The policy known as demonetisation, adopted by the Indian central government in 2016, was key to their diffusion: on 8 November, Prime Minister Narendra Modi announced that “the 500 rupee and 1000 rupee currency notes presently in use will no longer be legal tender from midnight tonight”, making the large majority of circulating cash illegal within hours. The same announcement pointed out that “persons holding old notes of 500 or 1000 rupees can deposit these notes in their bank or post office accounts from 10 November till close of banking hours on 30 December 2016 without any limit”, and humanitarian arrangements, including acceptance of such notes by public hospitals and health facilities, were made for the first 72 hours.

Sudden and life-changing for many residents, demonetisation came with two lead arguments from its proponents. The main argument, and the core proposition of the move, put demonetisation forward as a route to curbing black money, present in large volumes across the country and largely ascribed to cash. The months following the intervention revealed multiple feedbacks on the same argument: in August 2017, a Reserve Bank of India Report showed that 99 percent of the demonetised notes were returned to the central bank, questioning the actual effectiveness of the policy. Among other critical viewpoints, economist Maitreesh Ghatak reminded of the Ministry of Finance report which, in 2012, suggested that only a limited part of illegal wealth in the country was stored in form of cash, at the same time framing demonetisation as a politically impactful act of vigilantism enacted by the central government.

Paytm logo on a vegetable stall, Bengaluru, November 2017

At the same time, an ancillary argument was made. In a nation characterised by an extremely sizeable informal sector, whose transactions are traditionally cash-based, proponents of demonetisation sustained that the poor and unbanked would have benefitted from a transition to digital transactions. The rapid diffusion of mobile telephony across the country, as well as that of digital wallet architectures capable of storing, sending and receiving money through digital means, were depicted as routes for financially vulnerable users to act smoothly through the new cashless economy. On 7 January 2017, the by-then Minister of Finance Arun Jaitley called demonetisation a “historic” decision for the welfare of the poor, further underlining the linkages of the policy with the broader vision delineated by the National Democratic Alliance (NDA) government before coming to power.

But how have urban street sellers, whose transactions have historically been cash-based, lived with demonetisation?

The shock suffered in the first weeks after the move was palpable across people’s voices. In the last two weeks of November 2016, speaking to street sellers in Bengaluru and Mumbai, multiple narratives pointed to the suddenness of halt for their small businesses, whose cash-based nature curbed their transactions. But along with shock, a narrative of uncertainty dominated the conversations had at this time: becoming “banked”, and able to transact digitally, involved difficult and laborious processes. A street seller told me of her extenuating itinerary across three banks for opening a bank account, all of which requiring proofs of identity and address which not only she did not hold, but she had no indication on how to access. In the same market, another seller reported on having received different, conflicting information on the process for opening a bank account, revealing the difficulty to adapt to a system that – within hours – was set to become the norm across the country, and the norm for the essential process of generating livelihoods from labour.

Over two years later, in January 2019, we sit with Anil by his vegetable stall. While cash has been largely reintegrated into the economy, the same street market has changed: several stalls now carry digital wallet logos around their produce, among which Paytm, endorsed by Prime Minister Modi immediately after demonetisation, seems the most common. With digital wallets, the whole process of transactions becomes cashless: the buyer scans a QR code or sends a text message to effectuate their transaction, with the money being transferred instantly to the seller’s account. The market, Anil and other sellers tell us, has been visited frequently by e-wallet business representatives, competing with each other to offer the best conditions for street sellers to adopt their technology in their businesses.

And yet, the street market we are sitting in remains starkly cash-based. Echoing across the media, the “demonetisation through digitalisation” logic has not reached here, in spite of the push from e-wallet vendors and a cashless economy rhetoric that interests the national press.

In our time with his small stall of vegetables, Anil shows us a first reason for this. After adopting one of the main digital wallet systems, transactions on his phone still do not seem to go through: they are encountered with an error message, whose origin he cannot make sense of. He will address that, he says, if and when he has the chance to get the problem fixed. His loss, in the meantime, is the inability to use a system that costed him time and work to adopt, a system whose failure affects the very basis of his livelihood generation through sales of vegetable produce. While the cash-based nature of the system still affords him to accept cash payments, he sees no other route that that to continue a street selling business that demonetisation, over two years ago, had already put into serious peril.

More detail emerges from sellers in the same market. The market is characterised by the small size of transactions, whose amount – generated by people visiting the stalls for vegetables, fruit and essential groceries – is easily sorted out in cash. When discussing the reason for sticking to cash, a common point emerges: with a history of cash processes, no reason invites sellers to move to a new and opaque system, which replaces cash-based payments with the uncertainty of digital ones. Without the forced limit imposed by demonetisation, a cash-based ecosystem remains the nature for the street market, even in the city of Bengaluru, where adoption of mobile technologies is among the highest in the whole country. Bengaluru lies on the have-side of the stark inequality in digital access that affects the country, imposing constraints of mobile technology ownership that put the idea of “demonetisation through digitalisation” into more severe predicament.

The promise of a “cashless economy” still resonates through national politics. What such an economy has effected for Anil, and for sellers whose ecosystem does not support a digital transition, is however further exclusion from an economy based on new, uniquely digital means of transaction. In 2017 I asked if a new digital divide – between the haves and have-not of digital transactions – was emerging in post-demonetisation India. Narratives from Bengaluru street sellers keep that question open, and invite to think of the real impact of a cashless transition on informal businesses.