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We explore how different segments of the population in India coped, in terms of business transactions, with the sudden decision of the government to stop accepting certain legal tender bills, popularly referred to as demonetization. The decision to demonetize was followed by a large-scale push for adoption of digital payments. Behavioral changes during such shocks do have specific nuances different from those during normal times. Using the concept of resilience, we examine the drivers of behavior change that differentiated those that were able to make the switch compared to those that weren't. Those technologically more adept were more resilient to the shock, in terms of being able to navigate through new means of exchange. Also, rural poor showed greater resilience than urban poor, a function of the level of homogeneity in those societies with respect to technology adoption and the ability to cope without changing cash practices. We also found that those who had bank accounts and relied largely on those accounts for daily transactions, without being aware of alternate modes, were impacted the most. From a policy perspective this research cautions against unintended consequences of purely access-driven incentives to behavior change, advocating instead a holistic approach. 

In November 2016, the Government of India banned the vast majority of the nation’s banknotes in a move referred to as ‘demonetization’, with the stated goals of fighting corruption, terrorism, and eventually expanding digital transactions. In this study of 200 shop-keepers in Mumbai and Bengaluru, we found that cash shortage increased digital payment adoption but that digital payments fell after new banknotes became available. Digital payment adoption depended on the nature and scope of transactions, type of product sold, as well as personal factors specific to business owners such as comfort and familiarity with other digital technologies and online transactions. Using theoretical work on market and information behavior, we examined environmental pushes for technology adoption against prevalent transactional practices, trust, and control. We propose that the move toward digital payments must be framed within a larger undertaking of technology-driven modernity that drives these initiatives, rather than just the efficiency or productivity gains digital payments present.