Many of us have argued for the need to build convenience, security and ubiquity for digital payments. And then cash would start receding. No debate there.
But we forget that as individuals our brains are wired to go back to cues that are triggered at the sub-conscious level. We are not always the rational individuals economists would have us to be. Our decisions are influenced more by emotions.
CASH IS NOT THE ENEMY
To appeal at the emotional level, we need either a villain or a hero.
While bankers and payment professionals would disagree with me, but for most Indians cash is NOT the enemy. Consider this:
The currency carries images of Mahatma Gandhi, of the National Emblem and now of Mangalyaan etc. These are symbols of national pride. We are wired to feel proud to hold a piece of paper with these images on it.
We have traditionally celebrated an auspicious occasion with gifting loved ones with money. This association of gifting currency with happy moments is also tough to break anytime soon. Again deeply rooted positive connect.
When the Prime Minister announced the ban of old currency notes, the villain being chased was corruption. Not cash. So we never really took the storyline that cash is bad.
I don’t think any country would even want to walk down the path of trying to build a negative connotation with its currency.
Hence a story where cash is the villain may not work. We need something else to pitch Digital Payments at an emotional level.
This is part 1 in a series of posts where I try to understand why Cash is sticky? What are the some of the obvious things, we may have overlooked in our zeal to digitize payments.
Had an interesting conversation with an investor friend yesterday, who is really active in the start-up/seed stage. We were talking about the many niche plays that are coming up with the well funded steep growth we are witnessing in the ecommerce industry.
While there is no doubt, that Indians have started buying/shopping/ordering online and in a big way, what can also not be debated is the uniqueness of the Indian model, which throws up its own set of challenges. Lets look at a few of them:
Almost 70% of our ecommerce transactions areCash-on-Delivery (COD)
Many big portals have seen return-rates upwards of 30%
Current ecommerce growth is happening predominantly from tier 2 and tier 3 towns
What all of this translates into, is some serious logistics issues namely, collecting payments from COD customers, inbound logistics for returned goods and finally having an efficient distribution network, which is spread out really far and wide.
A few interesting plays are being introduced in the Indian economy
Players like Chhotu.in who are focusing only on ecommerce logistics including cash collection. This company has a simple pitch that it will help reduce the return rates and also ensure higher efficiency on the COD segment.
Niche players who are focusing only on the cash management for COD piece. One such player is riding on the positioning that it will enable ecommerce players to get sales proceeds into their accounts within x days. A payment guarantee that allows the ecommerce player to do what it does best- focus on demand generation and driving transactions.
If these challenges are very unique to our economy, it could mean the difference between the success of a local experienced player vs the success of a global ecommerce giant like Amazon.com.
Had an interesting conversation over the weekend with the office caretaker- a young late 20’s chap who has his wife and kids back home in Nepal. He told me very excitedly how he managed to send across money to them in Nepal through a new option wherein the credit was showing in his Nepalese account the very next day.
The few interesting things that really stood out were
He transferred all of Rs7000/- in one go. He didnt feel like testing the process as he was told about this option by a close friend. Referrals generate high sense of security and comfort
He was given a secure PIN and this gave him immense confidence about the process being secure. Though he had to ask his friend to SMS the same to his better half back in Nepal.
He was happy to pay a transaction fee of Rs100/- for an almost immediate confirmation of credit in the recipient account. Customers will pay decent amount as fees for specific features/benefits
He hasn’t heard about Western Union etc and went straight to this PNB branch in Connaught Place for his remittance.
He also talked about an option where money can be credited almost immediately (mobile based process) and was sure that this would be a great option to use during times of emergency. This gave him a lot of comfort knowing that his family would have access to immediate funds even when he is miles apart.
The above in my opinion is a clear indication of the kind of adoption payment instruments would see in the huge currently untapped market. While brand building will be a tough one, the player who invests early in training/educating users how to use this securely would see a huge advantage. I hope my friends in the Mobile Payments industry are listening and are as excited as I am.