Analysis of Payment Gateways in India (May 2008)
I am not aware of any other e-commerce site in India which is having more volume of transactions than IRCTC (Indian Railway Catering and Tourism Corporation). Every month IRCTC uploads the statistics which gives insight to the behaviour of various payment gateways. In the month of May 2008 IRCTC conducted 2.5 million transactions worth 2.33 billion Indian Rupees (58.45 million USD). A study of this data will give good insight to where Indian e-commerce industry is headed to.
This data analysis will answer several questions like- Which is the best and worst payment gateways? Which mode of transaction has most success rate? If a transaction fails, how many days should a customer wait to get the money back to his/her account.
Transactions in IRCTC can be done through credit card, net banking and cash cards. The graph clearly shows that cash cards is quickly gaining popularity as a preferred means of transaction after credit cards.
Around 31% of successful transactions were made using a Cash Cards (ITZ, DONE, TRANS). While it is 38% for Credit/Debit card and around 30 % for net banking. The volume of transactions came down in May 2008 compared to previous month. In May 2008 Cash cards made around 950 INR per transaction as opposed to 1013 INR for Credit Card and 820 INR for Net Banking.
As far as total value of transaction is concerned again cash cards is just trailing behind credit cards. If you see the Total Transaction Value graph, the value for all modes of transactions went up. But cash cards have a steeper increase in usage. Cash cards yielded 727 million INR as opposed to 607 million INR for net banking and 971 million INR for Credit cards. The most interesting thing to note is that there only three vendors for cash cards. There are 7 vendors for credit cards and 24 for Net Banking.
As far as transaction failure is concerned CitiBank PG and Citi EMI continues to lead the pack. On an average credit card transactions failed 26% of the times. Net Banking and Cash Card Transactions failed 36% and 27% of the times respectively. Its not clear from the data from IRCTC the reason of transaction failure. But it would be appropriate to assume that the failure rates include human as well as gateway errors. (The above picture shows only credit card payment gateway failures)
ICICI payment gateway is having the most success rate of 84% in credit card transactions. HDFC Bank is leading net banking section with 73% success rate and DONE Card (cash card) with 86%.
There will be a temporary hold on funds when a customer makes a online transaction. Money is deducted only when the transaction is confirmed to be successful. If the transaction fails, Credit Card Companies take 1.97 days to return the cash back to customer. Net Banking companies take 2.53 days, while Cash Card companies take 1.35 days.
At an individual level the following is list of the payment gateways with the average number of days they take to return cash to customer for a failed transaction. ICICI EMI (credits card) 2.2 days, HDFC (credit cards) 1.68 days, OBC (net banking) 3.43 days, Canara (net banking) 1.47 days, ITZ (cash cards) 1.52 days, Done (cash cards) 1.21 days.
One thing is very clear, one cannot ignore the important of Cash Cards in Indian e-commerce industry. What would be the reason for cash card getting popular in India? Any thoughts?
Also read - Cash Cards account for 28.8% of all online transactions in IRCTC (May 2008) | Indian Railways’ New Cash Cow; Rail Sampark IVR Service (April 2008)
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Comments
Raja,from what you said it cash cards are popular with agents of ICT kiosks etc. So consumers who go to agent for their tickets pay in cash and these agents pay railways system using their cash card. It sounds interesting, but I am having tough time digesting the fact. Could you point me to some materials to support this observation? (Cash card companies are trying their best to get more merchants to use cash cards) So do you think they will also follow the same format?
It is simple to observe the business model of a cash card company.
Platform is two sided: Cash-card companies just tie-up with a numerous service providers. And later they start acquiring agents to use their platform.
Now comes the commission part: Sometimes they get from discount from the service providers, a little of which they would pass to agents (for example air ticketing works like this!). Otherwise, customer is charged (IRCTC dont give any commission to cash-card guys and so, they charge customers on top of the ticket cost).
Target Audience: Who all can’t goto a website and/or pay through credit or debit card. These agents become middlemen between the remote customer and the service provider.
Of course there could be a small percentage of direct consumer who would use the cash-card on web. But that is not what makes significant for a cash-card company.
So it is obvious that cash-card transactions would become much higher than all those credit or debit-card transactions when cash card companies can acquire much more agents, in particular rural areas.
The rate of failure is also directly proportional to the amount of security / data which is required on the payment gateway. ICICI has a very simple model in place where you just give card no, expiry date and cvv number… other banks ask for the internet PIN number and their abandonment / failure rates will obviously be higher…
@ Raja Thanks for leaving comments and I have read your interesting article in VentureWoods. Well, I get the feeling that cash cards is going to dominate the e-commerce in India.
@Srini- I tried booking tickets on IRCTC site with CitiBank PG , which has the highest failure rate. It prompted me for 16 digit number, CVV and expiry data and nothing else. So I would think there should be some other reason for higher failure rates for some Payment Gateways
hey saad,
do you have the excel sheet for the month of May and June.
please it with me at my email address provided with the comment.
IRCTC updates the exceel sheet every month, thus i missed the previous issues.
Though from Google I was able to retrieve the July data.
thanks in advance.
these are interesting data points provided by IRCTC… but i could not find it in their website.. any specific url that will lead to collecting this data on monthly basis.
I have worked in a IT Security company (ControlCase) wherein we used to certify all credit-card processors all over the world (specifically Asia Pacific, Middle-East, US regions). This company is close to monopoly in India in this regard.
Coming to your question, why cash-cards are having a lot of transactions however you might have never heard of them!
There are two types of e-commerce transactions on Internet. First the consumer who makes the transaction on his behalf or family or for a friend and secondly an agent (ICT kiosks, Internet Cafes, etc) who completes the transaction on behalf of a customer.
Cash card transactions comes from those agents who are readily provided tie-ups with all major service providers. Obviously they are not popular in consumer segment.
Anyway, I have a lot more insider stories as I was employed in this industry. Contact me for more details.
Thanks,
Raja