Skip to Main Content
HBS Home
  • About
  • Academic Programs
  • Alumni
  • Faculty & Research
  • Baker Library
  • Giving
  • Harvard Business Review
  • Initiatives
  • News
  • Recruit
  • Map / Directions
Working Knowledge
Business Research for Business Leaders
  • Browse All Articles
  • Popular Articles
  • Cold Call Podcasts
  • About Us
  • Leadership
  • Marketing
  • Finance
  • Management
  • Entrepreneurship
  • All Topics...
  • Topics
    • COVID-19
    • Entrepreneurship
    • Finance
    • Gender
    • Globalization
    • Leadership
    • Management
    • Negotiation
    • Social Enterprise
    • Strategy
  • Sections
    • Book
    • Cold Call Podcast
    • HBS Case
    • In Practice
    • Lessons from the Classroom
    • Op-Ed
    • Research & Ideas
    • Research Event
    • Sharpening Your Skills
    • What Do You Think?
    • Working Paper Summaries
  • Browse All
    • COVID-19 Business Impact Center
      COVID-19 Business Impact Center
      The Effect of Payment Choices on Online Retail: Evidence from the 2016 Indian Demonetization
      27 Jun 2019Working Paper Summaries

      The Effect of Payment Choices on Online Retail: Evidence from the 2016 Indian Demonetization

      by Chaithanya Bandi, Toni Moreno, Donald Ngwe, and Zhiji Xu
      Online sellers in many emerging markets are in the early stages of a shift from cash-based payments to digital payments. Findings from this study of a leading Indian online retailer show that firms may enjoy gains from consumer demand on top of operational gains resulting from payment digitization.
      LinkedIn
      Email

      Author Abstract

      The Indian banknote demonetization in 2016 was one of the most significant international events of that year. Overnight, 86% of Indian currency in circulation was declared invalid unless exchanged for new bills. The sudden and unexpected demonetization constituted a large shock to the entire Indian economy. One effect of the ensuing cash shortage was a large and sustained increase in the adoption and usage of digital payments. We use detailed sales data consisting of more than two and a half million transactions from a leading Indian online retailer to empirically investigate the effects of payment digitization on the online retail industry. We take advantage of the demonetization as a source of exogenous variation that induced a subset of consumers to switch to digital payments from more commonly used cash-on-delivery payments. We show that consumers who switch to digital payments maintain their purchase frequency but spend more and are less likely to return their purchases. Our findings show that firms in emerging markets may enjoy gains from consumer demand in addition to operational gains resulting from payment digitization.

      Paper Information

      • Full Working Paper Text
      • Working Paper Publication Date: June 2019
      • HBS Working Paper Number: HBS Working Paper #19-123
      • Faculty Unit(s): Technology and Operations Management
        Trending
          • 29 Oct 2020
          • Research & Ideas

          The COVID Gender Gap: Why Fewer Women Are Dying

          • 13 Jul 2020
          • Research & Ideas

          Merck CEO Ken Frazier Discusses a COVID Cure, Racism, and Why Leaders Need to Walk the Talk

          • 11 Jan 2021
          • Research & Ideas

          Is A/B Testing Effective? Evidence from 35,000 Startups

          • 17 Feb 2020
          • Sharpening Your Skills

          How Entrepreneurs Can Find the Right Problem to Solve

          • 13 Jan 2021
          • Research & Ideas

          How 'Small C' Change Can Beat Large-Scale Rebuilding

      Antonio Moreno
      Antonio Moreno
      Sicupira Family Associate Professor of Business Administration
      Contact
      Send an email
      → More Articles
      Find Related Articles
      • Online Technology
      • Emerging Markets
      • Currency
      • Demand and Consumers
      • Retail
      • India

      Sign up for our weekly newsletter

      Interested in improving your business? Learn about fresh research and ideas from Harvard Business School faculty.
      ǁ
      Campus Map
      Harvard Business School Working Knowledge
      Baker Library | Bloomberg Center
      Soldiers Field
      Boston, MA 02163
      Email: Editor-in-Chief
      →Map & Directions
      →More Contact Information
      • Make a Gift
      • Site Map
      • Jobs
      • Harvard University
      • Trademarks
      • Policies
      • Digital Accessibility
      Copyright © President & Fellows of Harvard College