Wednesday, October 5 2022

By Khilan Haria

Go back to the last decade, when you would have probably bought your first book from an e-commerce site. It could have been an exciting experience, at least it was for me. The idea of ​​receiving a product in the comfort of my home was exciting. However, on the other hand, there was also a lot of fear when it came to payments. Most of us preferred to opt for cash on delivery, a kind of insurance if the products never arrived. Fast forward to 2022, India’s e-commerce market currently stands at $84 billion, and cash on delivery now accounts for a very small percentage of e-commerce transactions.

The history of Indian startups has seen one revolution after another. While 2010 was the decade of e-commerce, the current decade is that of fintech. However, for the first time in the history of Indian startups, two consecutive eras have complemented each other so well to enable the growth of both sectors.

The Fintech-Commerce duo

When CoD was launched in India in 2010, the use of digital payments accounted for less than 1% of money movements in India, making CoD a huge breakthrough for e-commerce businesses. However, the mere reliance on cash on delivery would have proven to be a major impediment to the growth of the e-commerce industry in India, largely due to the crisis it would have caused on the capital cycle. seller’s operation.

Also read: How apps can unlock the potential of e-commerce in mobile-first economies

When a buyer orders online through CoD, the money is collected by the delivery manager, who then passes it on to the delivery manager. At this point, the money is reconciled and sent to a central hub. Once the money accumulates here, it is deposited into the bank account of the third-party logistics (3PL) provider who then transfers it to the online retailer. The whole process takes more than 2 weeks and further complications are added if the order is a return to origin (RTO) order.

In addition to the capital crunch, the overall cost of cash orders (including RTO) was over 3% for most e-retailers, which is higher than the payment gateway fees charged for digital payments.

Therefore, enabling the growth journey of e-commerce was really a three-pronged affair. First, enable the switch from CoD to online payments. Second, solve the operational capital cycle crisis. Finally, for the remaining CoD orders, make them more predictable and reduce cost inefficiencies in the process. This is where the fintech industry came in.

The Trifekta for e-commerce growth

Aside from the trust placed in online platforms, the main reason consumers opted for CoD was the accessibility and convenience associated with Cash. However, if digital payments were to be made more convenient and secure than CoD, consumers would naturally switch to digital payments. The biggest solution for accessibility and convenience has been our own

UPI real-time payment network. UPI was mobile first and made payments easy and accessible to the masses by opening up third-party apps to create best-in-class UX on top of this revolutionary payment infrastructure. Additionally, by offering multiple payment methods, fintech has enabled e-commerce businesses to take the first step towards shifting consumers to online payments. This, coupled with the rewards and discounts associated with digital payments, has prompted consumers to make the switch. Additionally, fintech has enabled e-commerce sites to take advantage of different payment methods like subscriptions, which has helped them increase their revenue potential and bring predictability to their cash flow. With regulations such as tokenization and AFA, digital payments are made more secure to increase consumer confidence in the digital payments infrastructure, further accelerating change.

Also Read: UPI Payment Fees: UPI Transactions Free To Stay, Modi Govt Ignoring Any Fees

The challenge of operating capital crunch has been solved by fintech by providing e-commerce sellers with working capital and easy cash advances. Using the power of data analytics, fintech companies have been able to analyze vendor cash flow and assess working capital risk and cash out immediately. This boosted the growth of e-commerce sellers as they received the amount they needed to grow their business at the right time.

Despite all this, there are still commands that are CoD. Loose ends that need to be tied. Fortunately, with the help of data analytics, AI, and ML, the remaining CoD orders could be made safer for sellers. Thanks to technology, fintech can now help eliminate risky orders and undeliverable addresses, while allowing sellers to give prepaid CoD links to their customers to reduce risk. Through our analyses, we have found that by taking such measures, companies can save up to 30% of their operating costs.

The bright future

Over the past year, according to our data, e-commerce has been the 5th largest contributor to all transactions made on the Razorpay platform, growing by 84.37% and the future only looks brighter. As online transactions become safer and faster, e-commerce will experience renewed growth.

(The author is SVP and Head of Payments, Products, Razorpay. The opinions expressed are personal and do not reflect the position or official policy of Financial Express Online. Reproduction of this content without permission is prohibited.)


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