40. Cash (always!!!)

“Cash is the king and digital is divine”… thats what RBI said. We can debate about the second half of the sentence but first half is indisputable… Cash is undoubtedly ‘the king’…

A lot of people ‘like’ cash…. It is easy to understand, it is real, can be hidden from tax man and if you have plenty of ‘it’ then you can swim in that…

India’s cash landscape, working, complexities etc. are quite broad so will narrow the scope to… ‘Is cash acting as catalyst for eCommerce growth or creating a hinderance? Or who will win the race, cash or online payments?’

Let’s see…

Irrespective of all the talks about digital economy cash still remains important mode of payment… even in online eCommerce, more than half of transactions are still cash (on delivery). Many users who have the means to pay online still prefer cash… There are many reasons for predominant usage of cash:

• Lack of trust in merchant (whether my dress or food will be delivered)
• Fear of paying online (oh… what if they steal my money?)
• Lack of knowledge about how to use a payment instrument
• or simple random, stubborn reason of ‘I prefer cash only’…

How cash helped eCommerce grow?

Cash on Delivery (COD) helped merchant to build trust… after successful order fulfilment (may be multiple orders), a sceptical customer would start paying online… To be frank, I was one of those sceptics.

eCommerce merchants do not mind cash (although it has its own problems) as long as they are selling.

How Cash is hindrance to eCommerce?

a) Cash collection: Need a way to collect cash from customer and move it merchant’s account. Either merchant’s delivery person or 3rd party logistics/delivery company will collect cash from customer. If cash is collected by delivery company then they will charge additional cash handling fees apart from delivery charges from the merchant.

b) Fear of losing cash: Delivery person may lose money

c) Refunding these cash transactions is again bigger problem (merchant cannot send a person home to return the cash.. can they?)

How do you deal with cash?

Companies tried various methods to reduce the Cash on Delivery (COD) and convert those to POD (payment on delivery)

(a) Mobile POS machines to swipe cards

(b) QR codes: Put a UPI QR code (static or dynamic) on the package so user can pay using UPI App

(c) Send payment links to customer

No surprises that there is no silver bullet to the COD problem… each of the above method has one or other issue… limited payment option (e.g. QR code works only with UPI) or data connectivity issue in customer’s premises… even if you use combination of these solutions, if the customer wants to pay in cash only then you can’t help but accommodate it.

Cash orders creates bigger problem when it comes to refunds… When cash order is refunded then how do you return the refund amount to the user?? Reverse logistics person who collect the product from customer is not responsible for giving back the money. So how do you deal with this situation? There are multiple options to deal with it…

• Collect customer’s bank account details and push the money to that account via IMPS/NEFT or collect UPI ID and push refund amount to that UPI ID.

Note: But merchant has to be sure that account details are correct so they use methods like (a.) collecting the cancelled cheque (b.) doing penny drop to that account to verify the beneficiary details and check whether account is active (c.) then transfer fund to that account. Problems start cascading when you have to do this process at scale with efficiency

• Put that refund amount in merchant’s closed wallet and thus avoid hassles of refund plus feel happy that you have increased customer stickiness

8th November 2016… demonetisation was announced and then came series of guidelines including few for price control with idea to reduce cash and boost digital economy… in my view those price controls didn’t do much to grow the digital economy… Tell me how reducing debit card or UPI rate for Rummy or Fantasy sports merchant added any value?

4 years later… of course, the digital economy grew but so is the cash circulation. Cash is still the king or in fact, an emperor now…. yes, today I can pay for tea in roadside shop using UPI (hurray) or play a rummy game using card or order food using wallet… but still there is more cash in circulation than ever before and I don’t think it is reducing any sooner… So for foreseeable future, we will be living with cash