Blurring lines between Online and Offline payments

The conventional way of shopping has been treated as the most credible and widely preferred way of buying by a lot of consumers in India which holds true till date for many.
Blurring lines between Online and Offline payments

The conventional way of shopping has been treated as the most credible and widely preferred way of buying by a lot of consumers in India which holds true till date for many. Earlier, customers would simply walk into the stores, select goods they need and pay either by cash or card. The best thing about old school shopping was that the customers always left with the products they purchased right after payment. However today, a lot of shopping is done on the internet which is considered easier and more convenient by many people. 

The payment industry in India has observed significant alterations with the introduction of the online payment system. This phenomenon and the growing significance of the online payment sector is the result of the flourishing e-commerce industry, where the customers are shifting from paper based payment mediums to online payment mediums.Their preferences are moving towards transparency and flexibility as they are looking for better, more proactive solutions around life events. The most preferred instrument for online payment in India has beenpaymentcards and payment directly from bank accounts (Net Banking) has been picking up off late.

However, the thin lines between the online and offline mode of payment started blurringwith the constant evolution of technology and changing consumer behavior. The retailers from e-commerce and brick and mortar retail models started introducing the physical mode of payment alongwith the electronic mode into their respective systems in order to give the best of both the worlds to their customers. “Cash on Delivery” (COD) is currently one of the most popular modes of payment among Indian online stores. The major reason for its popularity is that the buyers can buy online and make the payment only after the goods are delivered to them.With the e-commerce industry constantly evolving, the cash on delivery system will require an alternate solution. A segment of buyers, who have the capability to pay electronically, should be given an option for paying electronically at the time of delivery.

Before delving over the blurring lines, it is important to first understand the nature of both the modes of payment. The definitions of both online and offline mode of payments are not very obvious in the modern day scenario with the introduction of e-commerce in the retail ecosystem and evolving transactional experiences.

The online mode of payment can be defined as a deal where the goods are booked on a web portal and the payments are cleared electronically even before the buyer has received the product. An offline mode of payment can be defined as a transaction where the exchange between the buyer and the selleris happening simultaneously. In this, the mode of payment would be card on delivery, cash on delivery etc.

Nevertheless, both the modes of payment have certain advantages and disadvantages. Offline payments are simple, intuitive & relatively more secure.With the emergence of NFC payments, the simplicity and intuitiveness will be taken to a whole new level. However, scalability of the ecosystem, ease of integration with core business applications and servicing of the ecosystem are significantly more cumbersome and involve higher amount of investments by the members of the ecosystem. There would also be restrictions in terms of payments only during working hours.

On the other hand, online payments are able to overcome these hurdles. But in order to attain the necessary levels of transaction security, the transaction experience takes a bit of suffering. To add to that, some amount of apprehension always remains in case the payment is happening before the delivery of goods / services.

In view of the given pros and cons, there would be a need to combine the best of offline & online payments in order to deliver superior consumer convenience along with the necessary security and fulfillment of business needs of the seller. This phenomenon is already being observed in some developed countries.

Payment via mobile wallets in the offline space is also a good example of the blurring lines.More and more sellers today prefer to opt for one stop solutions for all their payment needs. This may also lead to traditional online payment solution providers to start offering offline payment solutions and vice versa.

Also, in order to expand the Point of Sale (POS) infrastructure for payment acceptance, the incremental investments involved are not completely justifying the incremental returns. In order to justify this incremental ROI, innovative solutions are required which will further blur the lines between online and offline payments.

Authored Article By: Bhavin Mody, Director, E Billing Solutions Private limited

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