by Soumik Ghosh

Demonetization triggers spurt in digital payments; drives India towards cashless economy

Nov 10, 2016

The demonetization move that initially paralyzed the economy is now catalyzing the country’s digital payments ecosystem.

We’re are witnessing an economic transition right now. The quintessential digitally-spooked `Aam aadmi’ is keeping aside his wad of cash and signing up for e-payments and mobile wallets.

Needless to say, payment processing companies are overloaded and are racing the devil to accommodate the immense spike in traffic.

CIO India discussed the impact and implications with the top guns in the digital payments space, and here’s what they have to share.

The Paytm platform saw an overwhelming 435 percent increase in overall traffic over the last two days, and the company experienced a 1000 percent growth in money added to wallet and a 400 percent growth in transaction value of offline payments.

What’s got most industry leaders cheering is the fact that the black money-hoarding babus are now staring down the barrel.

Madhur Deora, CFO – Paytm says, “This is the biggest and the most ambitious step ever to crack down on black money and fake currency. We stand by the government in its efforts towards taking black money out of the equation and offering a major boost to the Indian economy.”

Paytm has been ramping up its customer and acquisition efforts as it is realizing the benefits of the strong positive network effect and its diverse use-cases.

Ola Money reported over 1500 percent increase in recharges across the 102 cities of its operation since 8:30 PM on 8th November 2016 till 12:00 PM.

Talking about the shift in economy, Pallav Singh, SVP & Head – Ola Money, says “This move marks the beginning of a significant step towards a cashless economy and Ola Money is at the forefront of our vision of a Digital India.”

Razorpay, on the other hand, witnessed a 150 percent spike on the morning after the decision was announced, which by afternoon, shot up to 200 percent. The company spotted a sitting duck and moved in for the kill by seeing an opportunity to provide immediate relief to thousands of small businesses caught off guard because of the demonetization.

“We’ve introduced ‘Express Activation’ which will allow merchants to get their account approved and activated within one hour of submitting relevant documents. Earlier, this process could take up two to three days,” reveals Harshil Mathur, CEO and Co-Founder, Razorpay.

Mohan Vizhakat, Group CTO & EVP, Manappuram Finance says that Indian customers are used to paying by cash. He believes that this move will cause a shift in the mindset of people, and make them more open to cashless transactions.

“At Manappuram, we’re focusing on the end-user perspective, and trying to make it more comfortable for users,” says Vizhakat.

Let’s talk Tech now

Now that we’ve gauged the volume and velocity of the traffic flowing through, what is the impact on infrastructure, and what are the security implications here?

“With respect to the security infrastructure, we’ve bolstered internal security and monitoring financial activity on an ongoing basis,” says Vizhakat, Group of Manappuram Finance.  

Rajeev Narayan, Chief Innovation & Strategy Officer at TechProcess Payment Services, India’s largest cash management and payment solutions firm, says that the company is scaling up its technology platforms, and looking at elastic models to deal with the surge of digital payments.


What panned out perfectly for the payment processing companies is the fact that they had recently geared up their back-end infrastructure to deal with the Diwali traffic, in addition to the impending Christmas-sales volumes.

Vimal Gupta, VP-Server Engineering, MobiKwik, says “We were geared up for the spike owing to Diwali sales. In addition to this, as it’s a cloud-based model, scaling up has been easy.” Engineers at companies like MobiKwik and Razorpay have been sweating it out though, working round the clock.

Similarly, Itz Cash wasn’t too worried about its infrastructure being over-burdened. “Our IT infrastructure is highly scalable and based on a private enterprise class cloud hosted in dedicated infrastructure at the datacenter,” says Daykin Creado, CTO, Itz Cash Card.

“A number of our business lines have seasonal peaks and we are well capacitated to scale on demand at all layers of our infrastructure, be it compute, storage or network. This is backed up by a fully redundant disaster recovery setup located in a geographically different seismic zone with near real time replication between both sites,” adds Creado.

What it means for Security

Harshil Mathur, CEO and Co-Founder of Razorpay, says that payment processing companies now have to be more responsible for ensuring that nothing happens from an infrastructural point.

He points out that companies need to watch out for DDoS attacks, though. “The added volumes do not compromise security, but DDoS attacks are a concern,” he says. “We have a CDN web firewall in place, and will any malicious threats will get red-flagged.”

Vimal Gupta of MobiKwik, says that the current challenge is to enable more security features to handle malicious traffic. The other factor to be considered is application optimization, to deal with a smoother flow of traffic.

“There might be slight hiccups with customers new to electronic transactions, so handling customer complaints and ensuring a smoother transition is the key,” adds Gupta.

(With additional inputs from Shraddha Singh)