Reasons Why Cash On Delivery Dominates Indian E-commerce

IamCheated.com Research Team | July 30, 2018  7:30:pm

The Indian e-commerce sector is growing each day and citizens simply love online shopping because of the convenience it offers and also a huge range of offers and discounts.  India’s e-commerce market has more than tripled since 2015 and still has a long way to go. Even people in rural areas have started shopping online. But in India, online shoppers depend heavily on the cash-on-delivery mode of payment (COD). More than 50% of transactions take place through cash on delivery mode of payment.

In cash on delivery, online shoppers have to pay the delivery executive on delivery of the product. In case the buyer fails to make a payment, the product will be returned to the point of origin. The COD facility has helped attract consumers who do not use digital payments like credit or debit cards.

When the Modi Government scrapped the old Rs 500 and Rs 1000 notes in November 2016, there was a reduction in sales in the e-commerce sector due to a heavy cash crunch. A cap on the ATM withdrawal limits affected the purchasing capacity of many customers, especially people who live in tier-2 and tier-3 cities, as they were used to cash on delivery mode of payment. Though demonetization brought a sudden decline in e-commerce transactions, there was positivity after some months.

In this blog, we will discuss why Indians still prefer cash-on-delivery over digital payments.

Why Indians love cash on delivery?

1. Old habits die hard

It’s a known fact that Indians love cash transactions and they are used to them. People in the rural and semi-urban areas are more comfortable with cash transactions rather than digital payments. Even though they have a debit card, they hesitate to swipe it at POS machines. Instead, they withdraw cash using the ATM and pay the delivery executive.

2. Lack of trust

Many Indians still don't trust digital payments. This is the main reason why cash-on-delivery has dominated the Indian e-commerce sector. They feel it is not safe to use digital payments, as they don't trust the internet and fear security risks. Also, each day people get to read news on online and e-commerce fraud. Many online shoppers have received fake products or products which were not ordered. Citizens may not receive the product after making an online payment. This has made them feel that digital transactions are dangerous.

See Also: How To Avoid Online Fraud?

3. No strict cyber laws

India does not have strict cyber laws to protect consumers from losing money in case of digital payments.  Even though the new Consumer Protection Bill has improvements over the previous ones, it does not completely address online payment and e-commerce frauds. This has been another important reason why Indians still opt for cash on delivery.

Is Cash-on-delivery illegal in India?

In the past week, there have been a lot of discussions on whether Cash-on-delivery is illegal or not. This has started on the basis of RBI's reply to a Right to Information (RTI) application filed by Mr. Dharmendra Kumar of India FDI Watch.

The Reserve Bank of India (RBI) in a reply to a query under the Right to Information (RTI) Act, has said that aggregators and payment intermediaries including Flipkart and Amazon are not authorized under the Payments and Settlements Systems Act, 2007, to collect cash on behalf of third parties at the time of delivery.

The relevant legal provisions and close analysis of RBI’s RTI reply says that the Cash-on-delivery mode of payment is not illegal, and RBI has not said so either.

 Have a complaint against any company? IndianMoney.com's complaint portal Iamcheated.com can help you resolve the issue. Just visit IamCheated.com and lodge your complaint.