Is your business ready to be “convenient” after demonetization?
Demonetization was crazy! Long lines, protests and overall frustration for the common man. Thankfully the new ₹500 and ₹2000 notes are out, and we can go to our old ways of using cash, right?
Well, according to the Economic Times, we love not being chained to cash. As per a survey from last November by IPSOS Research from a sample of 1000 users across India, 94 percent of the respondents intend to continue using digital payments even after the new bills have become widely available. Why? Convenience.
Carrying cash involves a lot of trouble, from reduced hygiene to increased safety risks and lack of automatic records, which paying digitally simply eliminates.
Now, intention doesn’t necessarily predict behavior, so let’s go to actual figures. Digital payments grew 57 percent on the last fiscal year. Usage of mobile wallets more than doubled, from 693 million last year to 1.1 billion transactions this year. Card payments grew 44 percent, from 1.9 to 2.8 billion transactions. Transactions using the newly introduced UPI increased from ₹90 crore in November 2016 to ₹1,659 crore in January 2017. Yep, we want to pay digitally. And with mobile usage growing from 391 million users currently to an expected 650 million by 2020, you can bet your money that digital payments will continue to grow.
Millennials are driving this change, with up to 82 percent buying online on a regular basis.
Millennials represent 64 percent of the Indian population already, and with an average annual income 12 percent higher than that of their parents, they are not a segment to ignore.
Is your business ready to be convenient? One of the biggest obstacles to widespread usage of digital forms of payments is limited acceptance. 58 percent of the IPSOS Research survey respondents mentioned vendors not accepting cards as one of the disadvantages of using a debit or credit card. What that means is that people want to make digital payments, but not all vendors are ready to accept digital payments. Apparently, merchants think the opposite that customers do, that accepting digital payments is too complicated.
That perhaps was the case back in the good old days of the early 2000s; when if you wanted to accept credit or debit card payments you needed to go through lengthy paperwork, a POS terminal with a connection to the landline, which required a different contract with each of the payment providers, which entailed deciphering a statement full of confusing fees and surcharges. That’s not the case anymore. Omni-channel ecosystems like ePaisa allow you receive all type of digital payments using your smartphone or tablet, get one easy-to-reconcile statement, and simple to understand fees… Ouch, fees. I forgot no one likes them.
Fees. Are they that bad?
Samar, Rusha, Amrit, and even Kabir, they are all going digital. Everyone is going digital, yet not all are choosing the same payment type.
Samar prefers using credit cards – he likes the perks. Rusha uses Mobiwik on her phone. Amrit plays safe – he never wants to miss a payment, so he keeps his credit card for emergencies and prefers using UPI. Kabir? He’s a smart one. He has several mobile wallets, all connected to his bank account. Before he makes a payment, he does some research to find which one has most cash back… Yep, users are getting sharp. You shouldn’t ask yourself then how much will you pay on fees accepting their business, but how much you will LOSE by not accepting their business.
But you want numbers, don’t you? The average POS in India charges about ₹360,000 in debit and credit card transactions per month. Roughly, half of that is for debit cards which pay between 0.75 and 1 percent on merchant fees, and half is for credit cards, which pay about 1.75 percent for domestic cards. So, a POS that charges ₹360,000 in one month would pay about ₹5000 in fees on transactions. Would you rather save that money, lose business, customers and only take cash?
With transactions going increasingly digital across the country and the government set on digitization, you would say no to a lot of business.
How much does it cost in working hours to count, transport, and safeguard cash?
How much time did you lose standing in lines in December?
Take a pen and paper. Run your own numbers. Convenience isn’t free. But it’s “convenient” and inexpensive.