Are e-commerce players moving towards the cashless economy?

It was in 2015 that MasterCard indicated that India was one of the countries least ready to switch to a digital payments system.
Are e-commerce players moving towards the cashless economy?

Richard Thaler, the Economics Nobel Prize winner of 2017 had praised demonetization, stating that it was the first step towards going cashless. The demonetization drive of November 2016 is still being talked about widely and there is much debate over whether it has been beneficial for the Indian economy or not. One of the only results that have been largely positive is the subsequent drive towards a digital, cashless society. Coupled with Aadhar and the wide availability of digital payment options, the foundations for a fully cashless economy in India have been laid.

It was in 2015 that MasterCard indicated that India was one of the countries least ready to switch to a digital payments system. India’s cash-to-GDP ratio, at 12%, is one of the highest in the world. With more than 95% of all transactions in cash until 2016, it was a bit too far-fetched to visualise a cashless future in India. However, demonetisation crippled the cash-dependent economy and forced citizens to adopt digital payments systems. Almost two years down, a lot of people are still dependent on digital payment methods on a daily basis for a wide range of services including online recharges, apparel shopping, utility payments, travel bookings and movie ticket amongst others. Thanks to inexpensive data and smartphone plans through which people are able to get quick access to information and data on products and services. The growth of smartphones and the 4G network rollout made e-tailing popular even in Tier 2 and 3 cities and towns across the country. An American multinational investment bank and financial services company, Morgan Stanley estimates that India’s e-commerce will grow to a staggering $200 billion by 2025, which means a jump of 30-40% in growth every year!

But why are e-commerce firms promoting the cashless payment methods?

According to a survey conducted by, an Indian cashback & coupons website, almost 50% of respondents switched from cash on delivery to digital payments and reaped several benefits. A digital, cashless economy has several benefits in terms of transparency, security, efficiency, and convenience. By moving towards the cashless economy, e-commerce firms are cutting down the conventional hassles associated with cash-based transactions, which for a longer period have troubled the society.. Cash payments for a very long time have been considered the best and secure way of conducting payments. However, with digital transformation, the concept of making cash payments is fast losing ground in terms of popularity. For instance, it is very easy for a fruit vendor or a kirana store owner to give you torn notes or counterfeit currency through cash-based transactions. There are chances that you waste a lot of time haggling with shopkeepers for change and give up on that money out of frustration. Also, carrying large amounts of cash is risky, as physical capital, if misplaced or stolen, is very hard to track or recover. Additional hassles such as a tangible delay in order fulfilment come to the fore when trying to send or receive physical money over long distances. Customers stand a chance to miss out on the deals and discounts that are currently in play by opting for the cash on delivery option. The result: lesser savings, greater risk and low value for money.

According to a note by research firm RedSeer, the e-commerce sector in India had touched a gross merchandise volume (GMV) close to $20 billion during 2017. However, of the $18.6 billion GMV clocked by the Indian e-commerce industry during the year, over 30 per cent was lost due to cancellations and returns of orders. Cashless transactions score on almost every aspect by offering flexibility of usage and security, besides greater convenience. The digital payment methods have also helped in preventing cash leakages, too. Since digital wallets make use of APIs for service delivery and have elaborate and detailed anti-fraud frameworks in place, the risk that comes with using them to complete the transaction is extremely negligible. Moreover, even if one loses or misplaces one’s phone, most mobile wallets can still be accessed through a website-based interface, where the user can block his or her transactions within minutes and change the login credentials. Using digital wallets also reduces the risk of misplacing or losing your physical wallet and can avoid the prospect of it getting stolen. The biggest motivator of digital transactions is the convenience that it offers; transactions can be performed anytime, anywhere without being physically present. A consumer can avail discount and cashback offers on e-commerce sites linked with mobile wallets and derive greater value for money. Managing expenses are much more convenient when utilising a mobile wallet, as users have complete access to their transactional history. This helps them plan their expenditure in a much more streamlined fashion, a benefit that a cash-led approach lacks. All these features have added greater value to digital transactions and are offering better end-user experiences. While online fraud in cyberspace exists, with proper measures e-currency can be secured. Some of the ways to keep fraudsters at bay are to set unique passwords, enable two-factor authentication, type out links in address bars instead of clicking on links and restrict the exchange of sensitive information over e-mail.

The future is cashless for e-commerce firms because they are not only faster and convenient but also drastically improve the experience of shopping for customers. By going completely cashless, e-commerce firms are making their transactions more transparent and helping India evolve into a truly cashless digital economy.

The article has been penned down by Harsh Shah, Co-Founder, Fynd


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