IMPACT and digital payment. Due to demonstration 500




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   While the world reeled from the shock result
of the US Presidential Elections, on November 9th, 2016, a nation of a billion
of people faced an even bigger surprise as all existing currency notes of 500
and 1000 rupees would be demonetised, with immediate effect. Since November 8,
every Indian is in the dilemma of choosing a secure and convenient cashless
payment option. The cashless payment options that are currently available
include credit/debit cards, e-wallets such as Paytm, Mobikwik, SBIe-wallet, etc.,
RTGS, NEFTetc. This unpredictable action taken by the Prime Minister Narendra
Modi has not only impacted e-commerce but at the same time has an impact on the
consumers and their shopping behaviour through online shopping. Thus it becomes
necessary to study the impact of demonetization on e- commerce industry and the
purchasing habits of the people. The main focus of the study is to understand
and analyze the effect of demonetization on consumer’s frequency of buying
product and consumer’s mode of payment for online shopping post demonetization.
The study reveals more positive than negative effects of Demonetisation on
E-commerce industry.


Keywords: Demonetization, ecommerce,
online shopping, E-Payment,  E-Wallet




1.Research Scholar,

Ravenshaw University,
Cuttack, India

Email: [email protected]


2.Student, M.Com

School of Management

Indira Gandhi National
Open University, New Delhi, India

[email protected]




1.1          INTRODUCTION

websites in India like Amazon and Flipkart take payments in form of cash on
delivery and digital payment. Due to demonstration 500 and 1000 RS notes became
obsolete as well as there was a cap on money which can be withdrawn from banks.
On November 8th when PM Narendra Modi suddenly announced demonetisation whole
country was thrown into turmoil. The mad rush to deposit now illegal tender of
Rs 500 and Rs 1000 notes has resulted in long lines at banks and at the same
time lines and foot falls at shops and business premises have vanished. As cash
gets rationed businesses and industry that depend on cash have been directly
impacted. A surprise in this list is fast growing E-commerce industry in India
and is the reason is over dependence on Cash on Delivery as a payment method.
Every E-commerce company either you talk about Amazon or flipkart or snapdeal,
each of these companies are facing a great loss.



term Demonetization has become a household name since the Government pulled the
old Rs 500 and Rs 1,000 notes out of circulation. This announcement by the
Prime Minister Narendra Modi is perhaps the most significant step taken,
targeted at ferreting out black money and curbing corruption. The effects and
its impact is seen everywhere across industries. – India’s largest
Cashback & Coupons site did a survey recently to understand the ‘Effects of
Demonetization on Online Shopping’. Over 1000 people across India participated
in the survey. 85 per cent of the respondents said they are in favour of the
recent move and agreed that it would be instrumental in reducing black money
and corruption in the Indian ecosystem.  

Swait and Rohan Bhargava, Founders
of commented, “We welcome Prime Minister
Narendra Modi’s bold decision to phase out the circulation of Rs 500 and Rs
1000 bank notes as this will bring transparency and stronger accountability.
The move has definitely given a boost to digital payments and has encouraged
people to shop online more. Wallets like Paytm have seen significant growth. We
have seen an increase in the number of people clicking through CashKaro and
going to our partner sites to purchase daily essentials and consumables. One of
the main reasons for this increase is that the Cashback that members earn from
CashKaro is paid over and above applied discount coupons, bank & wallet
offers. CashKaro Cashback is in the form of Real Cash and can be transferred to
user’s Bank Account.”




1.2          OBJECTIVES

To analyze the growth rate of products
purchased through e-commerce websites before and after demonetization.

To analyze the impact of demonetization
on payments modes used by the customers through online shopping.

To identify reasons how Currency
Demonetization will impact E-commerce Growth in India.

1.3          RESEARCH

This study is descriptive in nature. The
paper is based upon the findings from relevant literature. The present study is
descriptive type of research. Descriptive research is used to describe the
characteristics of a phenomenon being studied. It does not answer questions
about how/when/why the characteristics occurred. Rather it addresses (What are
the characteristics of the population or situation being studied?). The
characteristics used to describe the situation or population is usually some
kind of categorical scheme also known as descriptive categories.

The study is based on the secondary data. Secondary data has been
collected through the entire relevant sources:




??Government reports and publications

??Other Research



Luis, Kaplan N Steven (2000) in their working paper
“The effect of Business 2 Business
E-commerce on Transaction Cost” have elucidated the impact of introduction
of  E-commerce, to measure process
improvement through internet-based firms.

Lorenzini (2012) in the article “Innovation and e-commerce in clusters of small firms: The case of a
regional e-marketplace” has evaluated literature on innovation in clusters
and e-commerce to investigate how a particular kind of innovation project, the
establishment of a regional e-marketplace (REM),may contribute to regional

Ashwani , Aggarwal Gourav (2016) in their article “A Conceptual Study on Demonetization and its effect on
E-Commerce”, have analysed Demonetization
and its revolutionary effects in the field of e-commerce and technology.
Demonetization shows how it helps to boost cashless economy.

Pawan(2016), in her article “An Empirical Study Of The Effects Of Demonetization In India In
The Year 2016 and Analyzing Shifting Trends in Marketing / Purchasing to The
Alternative Options”

Porinita,Sayyed Vasimraja (2017) in their article “A Study on Impact of Demonetization on
E-Commerce Industry” has analysed the effect of demonetization on
consumer’s frequency of  buying product
and consumer’s mode of payment mode through online shopping post

Prairna,(2017) in her article “Impact of Demonetization on E-Commerce Industry” has analysed
understand and analyze the effect of demonetization on consumer’s frequency
of  buying product and consumer’s mode of
payment for online shopping post demonetization.

Deepika ,Dhamija Ankit(2017),in their article “Impact of Demonetization on E-Commerce
Websites& Payment Systems”,have analysed analyze the effect of
demonetization on consumer’s frequency of buying product and consumer’s mode of
payment mode through online shopping after demonetization.

Khatoon (2017) “Demonetization: A Boon To E-Commerce” , has
analysed the importance of demonetization in India, opportunities, and
challenges in front of the e-commerce.

9.      Prajapati Naincy ,Singh Sanjeev
Kumar (2017)”A Study On Impact Of Demonetization On Online Transactions” have
explained effects on online transactions during this huge transformation period
and what are the changes in trend of online transactions (encouraged or
discouraged) from a cash dominant economy to a cashless economy.






From the above figure 1 we can see that
demonetisation has negatively affected the E-commerce Industry and resulted in
slow growth for some period of time. It has led to the following consequences:


mentioned before – For people like myself, we settle for the cash on delivery
option.A COD order is the one where in your place an order online and agree to
pay on the spot when delivered at your doorstep. But, due to the halt on the
usage of notes, this task could not be completed. Thus, there had been a sudden
decrease in the amount of purchases done online, proving to be a negative
impact and a significant loss for E-commerce businesses like Amazon, Flipkart,
Snapdeal and so on. Most of the orders that were placed with the cash on
delivery option could not be delivered because the online retailers could not
accept old notes. All the overheads and the costs incurred in shipping the
orders go a waste in case of undelivered orders. This is indeed a significant
loss for the E-commerce players.

on COD orders

of notes in return created a break for Cash on delivery and thus, several
retailers had to temporarily stop their service of cash on delivery purchase
option. This turned out to be a blow for the revenue generation of a few

in the number of orders

a popular survey conducted by business insider, 83 % of consumers in India
settle for COD option. As a result of demonetization, it had a detrimental
effect on the number of orders placed online as most consumers did not wish to
settle for online transaction. As a major chunk of orders placed on the online
sites is paid with cash on delivery, demonetization had a detrimental effect on
the number of orders placed. People only had to wait to get their old
currencies to be exchanged and few of the customers are sceptical about online
payments. This lead to a notable surge in the number of orders placed on the
online shopping sites.

1.5.2       Impact on Online Payments

good impact of demonetization was the increase in the usage of cashless
transactions via credit and debit cards rather than being tied up in unending
queues at the ATM. Even something as simple as purchase of vegetables from a
vendor began to be done via mobile wallets such as PayTm- with cashless money
transfer. Vendors as well as public transport workers settled for online
payments due to the ban on notes.

there is one thing that has been growing at a good pace after demonetization,
it is online payments. Rather than being tied up in the cash crunch and
standing in the never ending ATM queues, more people switched to online
payments. There has been a rise in the number of debit and credit card
transactions. Even smaller vendors have introduced cashless payment methods. There
has been a significant growth in the mobile wallet sector. Transferring money
as well as making payments for online orders is easy with mobile wallets. More
people have begun to fill up their mobile wallets resulting in the growth of
the mobile wallet providers like Paytm, Mobikwik and more.

of Payment options

and debit cards are the existing options for online payments; but the
additional option to patch this void would be the online wallet service: for
example: the Amazon pay balance usage for purchase. This option made the
consumers feel much more comfortable during online transactions. Online
payments are quick, hassle free and time saving. And EMIs are the best part
about online payments. This avoids causing a financial strain when you make a
large value purchase. Know how easy it is to get instant loans for all your
appliance, furniture and gadget purchases. So do not let the ban on currency
notes of higher denominations stop you from buying all that you wanted.

Payments Interface (UPI) will see a steady growth. The support of the
government has also been in favour of promoting UPI for online payments.

 Banks like ICICI have introduced debit card
EMI option for mobile and other purchases. This can also benefit customers
making online purchases without a credit card. Imagine being to purchase all
high-end smart phones and laptop on EMI even without owning a credit card!

could choose to purchase all the gadgets, furniture and appliances you have
always hesitated to purchase due to your financial constraint through online
loans and pay easily with your debit card. These micro-loans are paid through
your debit cards and thus make it easy for you to purchase any gadget say like
iPhone 5S on EMI without a credit card from any of your favorite online
retailer. Besides payment through internet banking and debit or credit cards,
mobile wallet payments are great too. E-commerce sites can start adding more
options of payments and payment through popular mobile wallets too.

Discount options

the decrease in the number of orders placed online, retailers began to provide
several discount offers to attract customers for purchase of their items.
Several retailers also ran attractive promotions and discounts so as to
encourage people to place orders.

cashless to make payments

encourage customers on the usage of online payment facility, retailers also
began to provide offers and discounts specifically to those consumers who
decided to go for cashless payment. Thus, it helped in attracting customers
back to E-commerce websites. Online retailers also have introduced impressive
discounts for all the cashless payments. This encourages more customers to
choose a payment method other than COD and claim their discounts and in turn
helping the E-commerce businesses retain a reasonable cash flow.

in POS terminal and Online Shopping

shopping sees surge; Paytm wallet & CoD payments via bank cards most
preferred amongst shoppers. Currently, the number of POS devices are pretty low
in relation to the number of online orders made. By increasing the number of
POS devices, E-commerce players can make it convenient for the customers by
allowing them the security and convenience of COD orders. This, in turn, would
reduce the number or undelivered orders for the online retailers thus making it
a win-win situation. Though the situation cannot be fully rectified in one go,
E-commerce retailers could take certain steps to make it easy for the customers
to make their payments and thus, in turn, help their own businesses as well.


1.5.3 Reasons how Currency
Demonetization will impact E-commerce Growth in India.

are various changes occurring in E-commerce business and these are classified
as long term and short term effects. Just after currency banned in India
E-commerce business were facing with a sudden falls but it brings some vigorous
positive changes as well which can be last for long time, these are:

causes break on cash on delivery payment. Many E-commerce marketers stop cash
on delivery payment this brings a sudden falls in marketing because most of the
people still have trust issues for online payment.

stop accepting old currency of INR500 and INR1000 just after demonetisation
which results in vast number of delivery returns for Cash on delivery order.

trend emphasise on payment through digital mode. Scarcity of cash forced people
to use online payment mode or E-wallet. Special offers are being given on
online payments.

leads to increment in delivery returns because of lack of cash. Most of the
user after COD delivery said to take old currency otherwise asked to return the
delivery. This led to many orders getting cancelled and consequently results in
heavy loss to marketers.

going towards offering heavy discounts and drive sale offers to increase sale
by online payment.

also put discounts via online or card payment to increase engagement of users
in selling and purchasing.

increment in use of online wallet likes Mobikwik, pay money, Paytm,
etc.Increase user traffic on even small website, like: big basket, grofers,
etc., because these are accepting cards and online payment and scarcity of cash
forced people towards these online stores.

in app download and their use because it gives a platform for better experience
of marketing with special discounts and offers. It provides an easiest way to
track order with keep payment details safe for further use as well.

business man is looking towards E-commerce instead of commerce business because
of demonetization. Since people are moving towards digital payment and digital
marketing so businessman is also moving ahead accordingly.


1.6          CONCLUSION

To tackle the after-effects of
demonetization, E-commerce platforms have added credit card on delivery as one
of the payment options to put customers running out of cash at some ease.
Websites like Snapdeal and Flipkart have also been offering more discounts on
online payments and zero cost EMI schemes. Amazon spokesperson said that the
company witnessed ten times growth in credit card on delivery mode. However,
this hasn’t been helping the sellers much which have complained that such
efforts do not compensate for the loss incurred over COD mode. It is pretty
clear that demonetization has impacted the ecommerce industry. Due to
demonetization consumers are buying more products through online mode instead
of retail shops due to cash crunch. The consumers have adopted new method of
making payment where prior to demonetization, consumers were making payment by
choosing the cash on delivery option but now majority of them are shifted to
debit card and Paytm wallet to make payments. Hence, it can be concluded that
demonetization has opened up more opportunities for the ecommerce industry and
it will prove huge boon for digital payment market. Demonetization will lead to
the economic development of India and prosperity for its people. It will result
in higher GDP, transparency and integrity in the system, provide security to
labour, jobs for the youth, cheaper loans to promote entrepreneurship and
innovation, support farmers to double their income, provide affordable housing
for all and higher revenues to the Government which can spend it on the poor
and marginalized sections of society. Most importantly, it has brought a smile
on the face of every honest Indian.

1.7          FUTURE

future research must consider the consequences of cost changes for the behaviour
of agents and effects of internet market on vertical integration in “Bricks and
mortar” companies.




















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Khatoon (2017) “Demonetization: A Boon To E-Commerce” ,
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