Demonetization in India an era for digital payments

India is a country which has population of 1.25 billion, approximately 660 million debit cards and 25 million credit cards. In theory, the country is almost ready to go cashless, but where it lacks is the point of sales solutions terminals that stand at only 1.5 million. India suffers from a large degree of tax under-penetration (only 3% of Indians pay taxes) and most of the economy operates through use of cash. Some experts opine that as much as 70-80% of the economy is in the unorganized sector. This has resulted in India's tax to GDP ratio remaining low at 17 percent compared to the global average of 24 percent. The government's shocking announcement on November 8, 2016 demonetizing the high-value currencies of 500 and 1000 that account for 86 percent of India's cash in circulation, has indirectly boosted the country's emerging digital payments market. In fact, among the reasons justifying the demonetization move, which was principally to weed out black money and destroy the parallel shadow market, is now a transition sought towards a cashless economy. This policy direction by the government highlights the tremendous growth possibilities for the digital payments sector that is only just started to establish itself. Demonetization has also in a way dismantled some of the traditional barriers preventing Indians from adopting digital payment solutions such as the habit of using cash, complexity and unfamiliarity of digital payment systems, lack of compelling value proposition, and anxiety over fraud and network security.