Cheque, card or cash?

Shopping sites must incorporate a variety of payment mechanism to cater to a variety of payment preference for shoppers.

One of the biggest hurdles when it came to online shopping in the early days of the internet was the lack of a secure payments mechanism. People were wary of using credit cards to make payments because of security concerns. However, developments in encryption technology have led to growing confidence among consumers about using credit cards online.

The proliferation of 'plastic' as well as services such as online banking and bill payment for this 38.5-million strong Indian internet users community will further make more people 'comfortable' with transacting on the internet.. Innovative 'plastic' such as internet cards will also fuel this Rs1,180 crore business (2005-06).

This growing confidence is reflected in an online survey conducted by the Internet and Mobile Association of India (IAMAI) and Cross Tab in March-April 2005 of internet users and their shopping habits. The survey found that 62 per cent of the respondents used credit cards to make online payments.

Mode of payment used online

Nearly 58 per cent preferred cash on delivery, while 28 per cent used Cheques, an equal number used direct debit from their banking account and 23 per cent used debit cards.

There is a growing segment of affluent and educated users for whom using credit cards and other online payment methods such as direct debit and debit cards is second nature.

As far as demographics go, credit cards were more popular with older age groups. Not surprising, since these segments tend to be more affluent and more inclined to use them. The survey found that credit cards were most popular with the 46-60 age group (73 per cent of respondents), followed by the 26-35 segment (67 per cent) and the 36-45 bracket (62 per cent). The survey also found that 77 per cent of users who accessed the Internet through their mobiles were likely to pay with a credit card.

Among the other popular online payment methods direct debit from a banking account, was most popular in the 26-35 age group, with 35 per cent opting for it. It also seemed to be more popular among male shoppers (30 per cent) compared to females (19 per cent).
The Indian Railway Catering and Tourism Corporation Ltd (Irctc.co.in) requires special mention in galvanising ecommerce from the 'debit from banking account' for small denomination purchases having tied up with 14 banks reaching to more than a 139 towns and cities with exceeding revenues of Rs40 crore a month.

Of course, there will always be a large proportion of shoppers who prefer to use offline methods like cash on delivery and cheques. E-commerce sites will do well to offer a wide range of payment methods to attract a wide range of customers.

*The author is president of the Internet & Mobile Association of India