Alternative Payment Solutions and Their Benefits to Businesses
Currently the most widely used payment method for online purchases is through Cash on Delivery (CoD) services which are available to virtually all players in the ecommerce market and helped by a number of courier companies in Pakistan like TCS and Leopard. However, there is a vast difference in the cost of courier services between CoD and a normal product delivery, in that CoD services are much more costly, putting an additional burden on logistics. Therefore. e-commerce companies would rather the customers convert to other payment options.
One available method is internet banking, which has simplified problems of cash flow for e-commerce companies and is likely to significantly reduce the order cancellation rate. In this regard, Allied Bank Limited (ABL) and Habib Bank Limited (HBL) have been active. Not only does this form of payment benefit the retailer, it also enables the customer to make purchases without having to first withdraw cash and then pay at the time of delivery. For example, in the case of Yayvo.com, after finalizing their purchase the customer proceeds to the internet banking website of their respective bank; the order number is entered and the payment is directly deducted from their account. While this allows consumers to transact online, only a limited number of banks are affiliated with such websites and offering online payment services. Also, these channels of payment are expected to have transaction costs of 3% plus some additional fixed charges, which may make these modes of pay unfeasible for purchases of low cost items.
Another form of bank transfer is using the 1 Link ATM machine for payments. A customer simply needs to find a 1 Link Partner ATM, thousands of which are available all across Pakistan, and enter the order number under the bills payment section. The required payment is deducted from the customer’s bank account. Companies like Daraz.pk make good use of this service. However, a similar drawback exists with these transfers as well since not all banks are providing this method of pay. This adds to the additional inconvenience of having to go out to an ATM rather than paying from one’s home or mobile.
An upcoming and very effective model of pay has been introduced by Telenor’s EasyPaisa in the form of EasyPay. Daraz.pk and Homeshopping.pk especially employ this mode of payment. Customers have three options to pay for their online transactions with the introduction of EasyPay. The first option allows customers to place their order and then pay for their purchase by generating an EasyPay token that can be paid at any of the 70,000 EasyPaisa shops, acting as agents, located across Pakistan. A second option is having an EasyPaisa Mobile Account, through which a direct online payment transaction can be carried out. A third and relatively new version of receiving payment that EasyPay has provided online businesses is through debit and credit cards: buyers simply enter their card information and a notification of a deducted payment is received as a text message. Companies have their own EasyPay Merchant Account to which the money is transferred. There are, however processing costs the merchants have to incur. A payment with Mobile Account is charged at 1%, a payment through retail outlets is charged at 2%, and a payment through debit or credit cards is charged at 3%. Other than these, there are no setup costs or recurring annual charges. Payments through EasyPaisa Mobile Account and through outlets are cleared instantly, while payments through debit or credit cards may take up to 3 days for clearance.
Mobile banking through EasyPaisa Mobile Accounts is not the only one available in Pakistan. Introduced by Mobilink, Jazz Cash is also an option, used by Homeshopping.pk and Yayvo.com. It works very similarly to EasyPaisa Mobile Accounts, in that customers simply use their mobile number as their account numbers and carry out online transactions. Branchless banking is on the rise in Pakistan, with telecommunication companies competing with new and innovative options. Ufone’s UPaisa partnered with Meezan Bank, and Warid’s MobilePaisa partnered with Bank Alfalah are a few examples of branchless banking entities that are likely to pose a competitive threat to the existing players, whilst providing e-commerce companies with simpler payment solutions.
On the other end, India already provides consumers various payment solutions. With heavily trafficked sites such as Flipkart, Amazon, and Snapdeal, payment solutions are mostly molded to cater to the needs of the Indian ecommerce environment. Generally speaking, the Indian market is dominated by CoD (approximately 75% of online sales) due to reliability and convenience. The next most common method of payment are debit cards, with around 61% of population using options such as Visa, SBI cards, Maestro and other general debit cards, whereas the remaining majority is reliant on credit cards such as Visa, Mastercard, American Express, Diners Club and JCB.
There is, of course, NetBanking too, but the more interesting payment option are Cash Cards—another innovation in online financial activities with alternatives such as Done Cash, ITZ Cash/noQ 24×7, and Oxi Cash Card. These semi-closed looped prepaid wallets, since they are reliable and convenient in making quick payments of small amounts, are the preferred mode of payment when it comes to smaller ticket sizes, such as mobile recharges of food ordering. It would do good to have such a payment mode in Pakistan.
Cash is the giant elephant in the Indian subcontinent and it is extremely difficult to remove its stickiness in both nations. Even though, in the past few years electronic modes of payment have gained momentum, both countries lag behind when compared to other nations, especially those such as Sweden, which is on the verge of being cashless with only 2% of all its transactions being via cash. However, the Indian government, RBI and NPCI are moving towards the initiative to make India a less cash-functioning society. The benefits of other methods being enormous, with control over the black market being the most important one.
Writer: Noor Shahid
Editor: Uzair Shahed Islam
