From cash on delivery to card on delivery

The 'card on delivery' concept is expected to add substantially to the growth of e-commerce industry

The e-tailing market in India is growing fast and has the potential of reaching even the far flung markets in a country of 1.2 billion people. The ability to make products available from across the globe, at an affordable price, in a secured environment, with infinite choices has made e-commerce an instant hit. As per the Crisil Research, with a CAGR growth of 56 per cent in the previous five years and an expected growth of 50-55 per cent in CAGR terms going forward in the next three years, e-commerce will be an exciting journey to witness. At Rs 13,900 crore (as of 2013), the e-tailing industry in India is still in its infancy, which is 7.9 per cent of organised retail and 0.5 per cent of overall retail, as per Crisil Research.

However, according to a recent report by Gartner, the e-commerce industry is likely to cross $6 billion in revenues in 2015, recording a 70 per cent increase from a year ago. As per the Crisil Research, with a CAGR growth of 56 per cent in the previous five years and an expected growth of 50-55 per cent in CAGR terms going forward in the next three years, e-commerce will be an exciting journey to witness.

The cash on delivery option coined by e-eommerce has been the key enabler behind the growth of ecommerce in India. Cash payments have traditionally been the default payment option for Indians. If we go by figures, almost 75 per cent of transactions go through in cash. Despite 400 million debit and credit cards, cash emerges as a preferred means of payment. It has also succeeded in building trust between an e-retailer and consumer, which is also the an important reason behind growth of the industry. Today instead of wasting time looking out for a particular product in shops, customers can rather opt for a website to check options available and buy it online and pay in cash at their doorstep when the product is delivered.

However, this festive season, card payments have grown substantially, which is the sign of growing maturity of the sector. During Diwali 2014, e-commerce sales have seen credit card usage grow by 40 per cent over last year and debit card usage grow by 77 per cent. The use of card at the point of sale (POS) during the festive period has also demonstrated a growth of 29 per cent in credit card usage and 53 per cent in debit card usage in comparison to the last year's festive period - based on transactions processed by First Data.

The 'card on delivery' concept is expected to add substantially to the forecasted growth of industry. Two important factors that shape this change are security of electronic payments and evolution of today's consumers. One, 80 per cent of all transactions require pin entry, which has created a completely safe and secure environment to transact in. Two, the introduction of mobile point of sale has allowed cards to be accepted on delivery of the product.

Ecommerce players can hand over the Mobile Point of Sale (MPOS) devices to the logistic partners. The customer is required to pay by swiping their card on these MPOS devices. MPOS devices are advanced and seek PIN authentication by the customer to take the transaction through. In addition, e-tailers can also track delivery schedules and accept and reconcile all their payments on the same phone app.

With merchants being equipped with the MPOS solution, customers can also avail EMI facilities and, thus, plan their purchases further right at their doorstep and pay only when the product is delivered. The unique feature addresses the issue of inadequate cash availability during product delivery, especially in case of high value ticket items like electronics, jewellery etc. The secured environment that it provides to carry out the transaction has attracted e-commerce players and other merchants who depend on delivery to opt for MPOS solutions. First Data's Mobile POS is slated to clock 30,000 to 50,000 devices over the next 18 months and a large portion will be deployed to facilitate e-tailing deliveries.

By Nitish Asthana, general manager, ICICI Merchant Services, First Data