Online security encourages e-commerce transactions, says Dr Subho Ray, the new IAMAI president who takes over this column from his predecessor, Preeti Desai.
There are 38.5 million Indians online, and the number is expected to touch 100 million by 2007-08. E-commerce in India was worth Rs1,180 crore for 2005-06 and is expected to double to Rs2,300 crore in 2006-07.
The proliferation of credit cards has been a boon for online retailers, though most of them continue to offer multiple payment options such as direct debit to bank account, cash on delivery and cheque / demand drafts.
It's a good thing too. The graph below, from a recent study by the Internet and Mobile Association of India (IAMAI), shows how online shoppers view the security of different payment options.
Though the credit card is probably the fastest and most efficient way of paying for transactions over the internet, e-commerce players should offer multiple payment options to increase adoption of online shopping among consumers.
According to a survey of internet users and their shopping habits done by IAMAI and Cross Tab Marketing Services, 81 per cent of respondents who shopped online owned a credit card. Not surprisingly, 62 per cent of online shoppers have used credit cards for online purchase, whereas only 30 per cent would prefer to use it online if given a choice. The percentage can be boosted if banks step-up communications to their consumers about the safety of online transactions.
More than 4,000 merchants have signed up for online payment gateways where setting up a payment gateway can cost anywhere between Rs50,000 and Rs10 lakh, and banks maintain that much of it is incurred on ensuring that merchants have the right technology. Banks invest a lot to ensure that transactions happen in a secure, stable and reliable environment. They must not only be able to detect fraudulent transactions and protect consumers but also accommodate multiple simultaneous transactions. Payment gateways must be seamlessly integrated and there should be no downtime as this would turn away users.
Do note that banks evaluate merchants before setting up payment gateways on a number of parameters, including:
- The merchant's capability to fulfill e-commerce transactions
- Customer information security and controls
- The partner web site's privacy norms
- Controls and processes to prevent the occurrence of fraud
- The legal and financial nature of the partner web site
Though credit cards are clearly one of the most popular ways of paying online, other payment options such as direct debit and cash cards are becoming increasingly popular. For instance, when the Indian Railways began offering online ticket booking, credit cards accounted for 100 per cent of the transactions but today direct debit to bank accounts logs in 35 per cent and credit cards usage has reduced to 65 per cent.
Direct debit to bank accounts is expected to pick up as consumers especially in Tier II towns and cities have begun using this option more frequently than credit cards. As regional banks start expanding online banking and online transaction facilities, this base is expected to grow at a much higher rate than in metros.
The market is widening, and as Internet penetration and availability increases across the country, more and more people from non-metros are likely to transact online, if they have wider and safer payment options. Non-metros account for 22-25 per cent of online ticket sales on IRCTC, and people in these places are showing a significant willingness to transact online.
It is fairly clear that if consumers are assured of online security or given additional cover they will buy.