Reasons Behind the Popularity of Cash Cards in India
Cash cards are getting popular in India. The data from IRCTC (Indian Railway Catering and Tourism Corporation) gives good insight on the trends of e-commerce in India. This post looks into the reasons why cash cards are getting popular compared to debit and credit cards. Should the banks and transactions processing companies like VISA be worried about this trend in India?
Last month Raja (VentureWoods) wrote a post on the same subject. According to him the rise of the usage of cash cards can be attributed to the IRCTC agents. These agents sell train tickets to the consumers who do not have access to a credit card or debit card. He also makes a comment that right now the cash cards is getting popular with the agents who do bulk booking. The consumer segment is yet to be tapped. It is not clear what benefit (commissions) will an agent get when they use a cash card for transaction as opposed or a VISA/MasterCard debit or credit cards.
What is a Cash Card?
It is multi-purpose card which enables consumers to do transactions online as well as through mobile. The consumers have to pay upfront in full to get a cash card. This is different from a debit card where it is tied to one’s bank account and money is directly debited from the account. And a credit card where user gets a grace period of 30 days or more to repay a bank which issues the credit. The most popular cash cards in India are ITZ and Done. It is is similar to the prepaid recharge cards for mobiles and the gift cards. You go to a vendor pay the money upfront, get a card, scratch it for a unique number and use start using it! Once you exhaust the cash value of a card, throw it and get a new one.
One can also draw a similarity of a cash card with a temporary credit card numbers which can be used for online transactions for a limited amount of time or cash value. This practice ensures that the user’s original credit card number will not fall into wrong hands while performing an online transaction.
Data from IRCTC for June 2008
Based on the data from IRCTC, there were 2.7 million transactions worth 2.4 billion Indian Rupees. 22.7% of successful transactions were processed by ICICI Payment Gateways, 15.2% from ITZ Cash Card and 12.44% from Done Cash Card. And the remaining transactions(50%) is shared by around 30 other payment gateways.
Can Cash Cards over take VISA or MasterCard in India?
- The failure rate for a Cash Card transaction is 17%, as opposed to 29% for Credit card and 37% for Debit Cards
- The average number of days for refund of cash for a failed transaction - 1.24 days for Cash Card, 1.97 days for Credit Cards and 2.3 days for Debit Cards.
- Not all have access to banks and credit card companies. Cash cards can be bought over the counter from thousands of the vendors.
- Consumers gets to use the full amount (no processing fee) of a cash card. Visa Gift cards from IDBI, ICICI and SBI has a processing fee.
- Minimum for a cash card is 100 rupees and opposed to 500 ruppes for VISA Gift cards.
More and more consumers are getting hooked to internet and mobile. More people from far off places will start using cash cards. The E-Commerce companies in India cannot ignore the importance of Cash Card Companies for online transactions.
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