How the Ban on Rs 500 & Rs 1000 notes will Affect Startups in India

November 8, 2016

The demonetization i.e ban on Rs 500 and Rs 1000 notes by PM Narendra Modi has received responses from all over India. Most of the people are seen to be in support of and appreciative of this decision. People are lining up outside ATMs, rushing to petrol pumps, and others like us are rushing back to work.

They also gave us a peek at the new Rs 500 note that they plan on distributing come March 2017, it’s going to look like this:

new rs 500 note

While this ban on the currencies won’t really affect startup funding or hiring, we’re listing out a few domains that would be massively impacted by the Demonetization by Modi on Rs 500 and Rs 1000 notes in India:

1) E-commerce Startups:

No hassles of Cash on Delivery anymore as a majority of people will opt for e-wallets or online transfers such as Paytm, Airtel money, etc. The whole inconvenience of managing hand to hand cash payments will be almost eliminated for these eCommerce companies. On the other hand it could probably also impact the sales a little (I don't anticipate it to be very high) as those uncomfortable with card usage may deter from ordering. Of course, eventually, I feel everyone will be compelled to make online payments and get aboard.

2) Cab Companies:

Companies like Uber and Ola, having their own wallet system, will majorly benefit from this. Most people will opt for booking cabs as they have a very convenient method of paying via wallets.

3) Wallet Startups:

Demonetization will give e-wallet startups a massive advantage. Expect a crazy number of downloads in the next few weeks. People will flock kiosks to convert cash into wallet currency. Since the adoption of these wallets would increase significantly post the ban, wallet startups need not give a huge amount of cashback to the customers. The cashback given by these companies would eventually reduce to NIL.

4) Food Delivery Startups:

The same principle would apply here as with many e-commerce companies. Since most people would prefer ordering through food delivery startups like Swiggy, FoodPanda, etc., considering one can easily pay through online payments/e-wallets without getting into the hassle of paying with cash and dealing with the huge issue of trying to get change for big notes like Rs 2000.

Now the question is: Would bootstrapped startups accept funding in cash denominations of Rs 500 and Rs 1000 notes?

Let us know your thoughts on the Demonetization in the comments section below!

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