Trifekta that led to the e commerce boom in India, Go back to the last decade, when you probably would have bought your first book using an e-commerce site. It could have been an exciting experience, at least it was for me. The idea of receiving a product from the comforts of my home was fascinating. However, on the other hand, there was also a lot of fear when it came to payment.
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Fintech Trifekta
Most of us prefer to opt for cash on delivery, a kind of insurance if the product never arrived. Fast-forward to 2022, the Indian e-commerce market currently stand at $84 billion, with cash on delivery now making up a very small percentage of e-commerce transaction. (Trifekta)
The history of Indian startup has seen one revolution after anothers. While the 2010s were the age of e-commerce, the current decade is the age of fintech. However, for the first time in the history of Indian startup, two consecutive eras have complemented each other so well to enable the growths of both sector.
The Fintech Commerce duo
When CoD was launched in India in 2010, the use of digital payment accounted for less than 1% of India money movements, making CoD a significant step forward for e-commerce businesses. However, simply relying on cash on delivery would have proven to be a major hindrance to the growths of the e-commerce industry in India, largely due to the crisis it would have caused in the seller operating capital cycle.
When a buyer places an order online through CoD, the delivery executive collect the cash & then passes it on to the delivery manager. In this stage, the cash is reconciled & sent to an operation center. Once the money accumulates here, it is deposited into the bank account of the third party logistics provider 3PL who then transfer it to the online retailers. The whole process takes more than 2 week & more complication are added if the orders is a return to origin order RTO. (Trifekta)
In addition to facing a capital crisis, the total cost of cash orders including RTO was over 3% for most online retailer, which is higher than the payments gateway fees charged by online retailer. digital payment.
So enabling the eCommerce growth journey was really a three-pronged affair. First, enable a switch from CoD to online payments. Second, solve the crisis of the operating capital cycle. Lastly, for the remaining CoD orders, make them more predictable and reduce cost inefficiencies in the process. This is where the fintech industry stepped in.
Trifekta for the growth of e-commerce
The main reason, other than trust with online platform, that consumers chose CoD was for the accessibility & convenience associated with Cash. However, if one were to make digital payment more convenient & secure than CoD, consumer would naturally switch to digital payment. The biggest solutions for both accessibility & comforts has been our own. (Trifekta)
UPI realtime payments network. UPI went mobile first & made payment simple and accessible to the masses by leveraging third party apps to create a best in class user experience on top of this revolutionary payment infrastructure. Furthermore, by offering multiple payments method, fintech enabled e-commerce companies to take the first steps in switching consumer to online payment. (Trifekta)
This, along with the reward & discount associated with digital payment, motivated consumer to make the switch. Additionally, fintech enabled e-commerce sites to take advantage of different payment method, such as subscription, helping them expand their earning potential and bring predictability to their cash flows. With regulations like tokenization and AFA, digital payments are made more secure to increase consumer trust in the digital payment infrastructure, further accelerating change.