Charted: Indians are using mobile wallets more but for smaller purchases

In November 2016, the Indian government pulled high-denomination currency bills out of circulation in an effort to clamp down on corruption and the financing of terrorism. In the immediate aftermath of the move, people were subjected to long lines outside banks and ATMs to trade in old notes for new ones. Often, after hours in the sun, citizens found only empty ATMs.

While the common man had to deal with the consequences of the sudden decision, one sector has thrived: the mobile wallet industry. An economy where an estimated 95% of transactions were made using cash was now looking at a cashless future. From big companies to roadside stalls, a slew of businesses started accepting payments through e-wallets.

As the Indian economy recovers, mobile wallet payments are continuing to accelerate. The transaction value of over $3.6 billion in the first quarter of 2017 marked a 60% increase from the previous quarter in the Indian mobile wallet space, according to a new report from RedSeer Management Consulting.

Paytm, the market leader for digital payments in India, has benefitted from this surge, amassing over 220 million users. Recently, it secured $1.4 billion in funding from Japanese telecom and internet giant Softbank. After finally receiving a license from the Reserve Bank of India, the company is starting operations for the Paytm Payments Bank on May 23.

Although there has been an increase in adoption, there was a decrease in average spend, Redseer noted. The average transaction value was worth $4.40 in 1Q 2017, down from $7.20 during the same period a year earlier.

For this run to continue, smartphone and internet use need to pick up more: The country is expected to have over 450 million smartphone users by June 2017 but half of them likely won’t subscribe data plans. The rural masses tend to steer clear of mobile payments because of language barriers and lack of knowledge about devices, a joint study by philanthropic investment firm Omidyar Network and Dalberg Global Development Advisors found. Cultural norms and a lack of financial autonomy also deter women from using digital finance services.