Modi’s surprise move on rupee notes has come as a pleasant surprise indeed for Indian internet startups

The Narendra Modi government’s decision to replace the Rs500 and Rs1,000 denomination notes with new ones has done in two days what Indian internet startups have been trying for years: get users to pay online instead of choosing cash on delivery (COD). Prime minister Modi sprang a surprise on Nov. 08 by announcing that the existing notes would cease to be legal from midnight that day. The decision was part of his government’s measures to curb black money—wealth that is unaccounted for—in Asia’s third-largest economy. To ensure a smooth transition to the new currency notes, Modi said ATMs across the country will remain shut for up to two days and banks would not operate on Nov. 09.

“(The) COD payment mechanism has worked well for all e-commerce players. With the government’s latest move, a big share of COD-dependent consumers will be unwilling or unable to make a transaction,” said Swetabh Pareek, head of corporate finance at research and advisory firm Aranca. “In the longer run, this may add much-needed momentum to the adoption of digital currency.”

Pareek expects investments in the fintech space to “increase substantially,” thanks to the “wider reach and enhanced growth prospects emerging with this move.”

In 2015, Indian fintech companies had attracted around $1.5 billion (Rs10,060 crore) in investment, as per Aranca.

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