Online merchants in India increasingly are turning to cash on delivery as a payment method to cater to growing numbers of shoppers who prefer not to use credit cards.
Some of State Bank of India’s client online merchants have begun offering the payment option because many consumers in India, especially in smaller towns, have a cultural aversion to using credit cards, an official at the alternate channels department of the Mumbai-based bank tells PaymentsSource.
Indian financial institutions have issued some 18.2 million credit cards, far less than the 211.8 million debit cards they have issued, according to data from the Reserve Bank of India.
“That skewered proportion of credit to debit cards itself tells you which way the tilt in payment method is for Indians,” the official says, noting not all online retailers accept debit cards in India.
Online stores cannot survive by just targeting customers who live in metropolitan cities and tend to have credit cards, so offering cash on delivery as a payment option was inevitable, Mrinalini Manral, an analyst with research firm Dassler Business Intelligence, tells PaymentsSource.
Consumers in Tier II cities–those outside of the four metropolitan areas of Delhi, Mumbai, Chennai and Calcutta–prefer not to use bankcards because they tend not to trust them, and many find them cumbersome to use, Manral says. “Even if merchants invest in customer education, the effects will only be seen in a few years,” she says.
Sachin Bansal, CEO of online bookstore Flipkart.com, tells PaymentsSource in March that his company settles almost half of its sales in India through the cash-on-delivery method.
Many Indian consumers do not own debit or credit cards, so Flipkart.com needed a way to cater to them, Bansal says. “Expect online retailers in India, who are looking to expand their footprints, to invest as much in the [cash-on-delivery] option as they would in credit and debit options,” he says.
Given the apprehensions ingrained in the Indian mindset in relation to any monetary transaction conducted online, the cash-on-delivery option is a much-trusted one that works well for the online brand, Bansal says.
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