Online shoppers take to cash payments amid digital push
A year after the government’s all-out effort to reduce cash usage and push digital payments after the invalidation of high-value banknotes, cash transactions at e-commerce firms have already returned to pre-demonetisation levels.
That’s an indication that hopes of a transformational shift toward digital payments in the aftermath of the November 8, 2016 note ban, which caused an unprecedented cash crunch, are unlikely to be realised in an e-commerce market estimated where, according to Redseer Consulting, transactions reached $14-15 billion last year.
Cash transactions, which accounted for as much as 60-65% of all e-commerce orders in India until November 2016, dropped to as low as 45-55% after demonetisation took out 86% of the currency in circulation by value, according to executives at online retailers and logistics firms.
But as cash availability rose starting early this year, many shoppers immediately shifted away from digital payments. Now, cash again accounts for 60-65% of all e-commerce orders, these executives said.
Mint had reported on November 8 that demonetisation has failed to make a dent in cash usage in the Indian economy due to poor digital infrastructure and the ingrained habits of consumers besides other reasons.
“Cash transactions are back to their old levels, or even higher very slightly,” said TA Krishnan, CEO of Ecom Express Pvt Ltd, one of the largest logistics providers to online retailers. “E-commerce companies are going deeper into the country and in
NEWDELHI/BENGALURU:
these areas (Tier 2-3 cities), consumers are paying by cash. Eighty percent of our deliveries are paid (for) with cash.”
According to Krishnan’s estimates, some 70% of all e-commerce orders currently are paid for with cash or card on delivery.
“We see no positive shift towards credit or debit cards and the COD (cash on delivery) orders have gone back to old levels. In smaller markets (Tier 2 and 3 cities), this number is up by 5-7 (percentage points),” said Abhishek Chakraborty, executive director at DTDC Express Ltd, a logistics firm.
DTDC ships close to 1 million orders a month. The company had seen prepaid orders touch about 70% of overall e-commerce business soon after demonetisation and this number is now back to about 60%.
Hyperlocal delivery firm Shadowfax Technologies Pvt. Ltd said it has also seen a jump of 5 percentage points in cash orders in the last three months. Shadowfax is one of the biggest external logistics providers to online food and grocery delivery companies.
According to Sanjeev Kathuria, CEO of courier firm Dotzot, cash on delivery orders saw a sharp fall after demonetisation but returned to normal levels soon after.
Flipkart and Amazon India, India’s two largest online retailers, have seen a slight decline in the proportion of cash orders delivered by their own logistics units, executives at the companies said on condition of anonymity. Flipkart and Amazon, which also use third-party logistics providers, have been pushing customers to use their digital payment platforms, PhonePe and Amazon Pay, to pay for orders. But on an overall basis, a large number of their orders still continue to be paid by cash.
Flipkart declined to comment for this story.
Without giving numbers, Amazon India (Amazon Seller Services Pvt. Ltd), the secondlargest e-commerce firm, said the proportion of its cash orders has reduced this year compared with the levels before demonetisation.