An overwhelming 88 per cent Indians are concerned about the security of online financial transactions and at least a quarter refrain from making payments online for fear of fraud, says a survey done by prepaid ecommerce firm ValuAccess.
The survey that covered 3,200 buyers said 47 per cent use their credit card as the preferred mode for payment followed by 34 per cent for cash on delivery and 17 per cent through net banking. Over 60 per cent of the respondents were below 30 years of age and 72 per cent of them were male. Movie tickets and electronics and gadgets was what they bought most online.
ValuAccess believes the anxiety over fraud and the young demographic population of the users would pave the way for growth in the prepaid or gift card category. Over 10 per cent of the respondents were below the age of 18, the minimum age in India to acquire a credit card. A prepaid card can be bought from a regular grocery store or at a pharmacy by payment of cash and it can be used for payment online.
“The challenge that ecommerce firms face in India is of secure payment options online. Consumers are anxious they may become victims of fraud if they use their credit or debit card online. It’s a unique issue that we are witnessing in China as well,” says Alistair Gordon, Founder and CEO, ValuAccess. “A large number of buyers in India prefer cash on delivery method, which has a high rate of rejection….the customer may not be at home or he may not have enough cash at that point of time when the delivery guy arrives. It is not good for the seller as it means higher cost.”
There are over 461 million active debit and credit cards in India but the country has one of the lowest card per transaction ratio of 0.1 per month. Effectively, only 1 out of 10 cards is used for an online transaction in a month.
“The fear of it being misused or somebody hacking into the system is a major worry. That is why prepaid cards have a future here,” says Gordon who worked in the telecom industry before. “In the US it is used more as gifts as everybody uses cards there. That too will happen in India…it is already happening somewhat in the corporate sector. But first, the growth will be from those who either do not have a card or do not want to use them for fear of fraud.”
ValuAccess, which entered India in 2008, has launched a number of branded cards with firms – ecommerce or otherwise – like MakeMyTrip, Pizza Hut, Flipkart, Woodland, Tanishq, Benetton and Kentucky Fried Chicken (KFC). Its retail tie-up through which it sells these cards are with Big Bazaar and Apollo Pharmacy.
The model almost sounds like a win-win for everybody. The e-commerce firms get an assured customer (most cards have a validity period) as there is no threat of rejections like in the case of cash on delivery. The retail chains and ValuAccess get a commission on each card sold. Further, the customer also gets an incentive by way of higher value for the amount paid. On a pizza hut card for example. he can order pizza worth Rs 550 for a card worth Rs 500.
“We are quite pleased by the rapid expansion of the ValuAccess network. Customers can now buy a BookMyShow card from physical retail stores and use it to purchase tickets on BookMyShow,” says Marzdi Kalianiwala, Vice President, Business Intelligence and Marketing, BookMyShow. “By giving us the opportunity to reach out to customers who either don’t have access to digital payments or are reluctant to use them online, it acts as an important channel for customer acquisition along with great last-mile visibility.”
While Gordon is not willing to divulge the number of cards he has sold so far, he claims the response has been phenomenal. “I am here every alternate week. Thats how busy India is keeping me,” he says.