A Study on the Effect of Demonetization on the Use of Digital Payment Instruments in India Using Regression Discontinuity Design

Abstract

Demonetization carried out in 2016 was one of the biggest events in India’s financial history. This policy had a widespread impact on all aspects of Indian society- it dramatically increased the usage of digital payment instruments across all social classes and regions. This paper analyzes the impact of demonetization on various digital instruments using the regression discontinuity design. The paper further explores the reasons for the increase or decrease of digital payment instruments. Among other significant results, the study finds that the volume and value of Mobile-wallets and Immediate payment services saw the most increase post-demonetization. The factors driving increased usage post demonetization were availability of devices, ease of use, and other benefits of using these instruments.