Demonetization and Digitization

57 Pages Posted: 2 Jul 2018 Last revised: 26 Dec 2018

See all articles by Sumit Agarwal

Sumit Agarwal

National University of Singapore

Debarati Basu

Indian Institute of Management (IIMB), Bangalore

Pulak Ghosh

Indian Institute of Management (IIMB), Bangalore

Bhuvanesh Pareek

Indian Institute of Management (IIM), Indore

Jian Zhang

Hong Kong Baptist University (HKBU) - Department of Finance and Decision Sciences

Date Written: December 24, 2018

Abstract

Using big datasets from four diverse sources, of both suppliers and facilitators or recipients of digital payment platforms, we conduct a comprehensive analysis of the impact of unexpected demonetization in India on payment digitization. The drying-up of cash due to demonetization leads to a significant increase in the level of payment digitization and the rise applies to both traditional and non-traditional digital payment modes, including card and e-wallet. The usage pattern persists even during the re-monetization period when cash makes a comeback in the economy, indicating the success of demonetization in enabling new digitization technologies to make inroads into consumer payment habits. Heterogeneity tests reveals that regions that are underdeveloped economically, lag in financial inclusion and technology infrastructure and have a population with more conservative demographic characteristics experience a weaker digitization response.

Keywords: Digitization, Payment Method, Demonetization

JEL Classification: G02, G10, Q5

Suggested Citation

Agarwal, Sumit and Basu, Debarati and Ghosh, Pulak and Pareek, Bhuvanesh and Zhang, Jian, Demonetization and Digitization (December 24, 2018). Available at SSRN: https://ssrn.com/abstract=3197990 or http://dx.doi.org/10.2139/ssrn.3197990

Sumit Agarwal

National University of Singapore ( email )

15 Kent Ridge Drive
Singapore, 117592
Singapore
8118 9025 (Phone)

HOME PAGE: http://www.ushakrisna.com

Debarati Basu

Indian Institute of Management (IIMB), Bangalore ( email )

Bannerghatta Road
Bangalore, Karnataka 560076
India

Pulak Ghosh

Indian Institute of Management (IIMB), Bangalore ( email )

Bannerghatta Road
Bangalore, Karnataka 560076
India

Bhuvanesh Pareek

Indian Institute of Management (IIM), Indore ( email )

Prabandh Sikhar
Rau-Pithampur Road
Indore, Madhya Pradesh 453331
India

Jian Zhang (Contact Author)

Hong Kong Baptist University (HKBU) - Department of Finance and Decision Sciences ( email )

Hong Kong

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