The problem statement

As e-commerce spreads in India,more and more people will switch to online to buy books, magazines and various other products online. With time, more and more transactions will be made online, including a majority through credit cards. Today in the name of making your online experience easier and faster, each e-commerce site or payment gateway stores your payment details in their databases. This, they claim prevents you from having to remember multiple cards or to have the card handy while buying something. This is done by all major sites including Amazon, Apple, Google etc. Of course, the convenience part is just a smoke-screen. It is psychologically beneficial for these sites to not let the customer have second thoughts when he reaches for the wallet to remember the credit card number and the various other related bits of information.

What are the consequences?

Security

There are two consequences of allowing a site to do store this information online. One is, of course, the security risk. In case someone hacks the site’s database, you run the risk of exposing your credit card details to thousands of unscrupulous hackers. But the safety aspect of this has been written countless number of times elsewhere.

Auto-renewals

What I want to explain is one more consequence of storing your payment information online – the problem of auto-renewals.

Netflix, Spotify, Amazon Prime, Google Music, Zinio, Magzter – all of these are changing the consumption model in today’s world. Moving from paying for a physical CD, to downloading single mp3s, to a streaming model, the online world is moving towards a subscription model – be it magazines, movies, TV shows, music subscriptions.

I subscribe to many digital magazines as it is more of an eco-friendly option. No doubt it is cheaper than the paper edition. Many sites like Magzter and Zinio come up with offers upto 75-90% off on various magazines, which is a steal in my opinion.

But my experience on some of these sites has been far from ideal. Let’s say I bought a one-year subscription for a magazine which was being offered at a 90% discount. The site stores my payment information by default (in the name of convenience). At one of these websites, surprisingly I had no way of accessing this payment information which was stored in their database. When the subscription expired, the site auto renewed my subscription and charged me the full price of the magazine. When I wrote to them about cancelling my renewal, they simply said that cancellations are not part of their policy. This was indeed a shocking revelation. Not providing the user the option to change or remove their own payment details is a major bug/lack of feature. Not only this, I did not have any option to turn off auto renewals on any of my magazines through their website.

Even when I had gifted someone a one year subscription to a magazine, this site went ahead and renewed their subscription once it expired! The “giftee” in essence would get a life time subscription of magazines until and unless I decide to block that particular card. In the end, I did manage to get them to cancel auto-renewals on all my magazines.

So what are the solutions?

This problem comes up with sites who are not yet established players in the e-commerce field (and by that I mean, anyone who is not Amazon, Apple or Google) and by extension, not trust-worthy to keep my credit card information stored in their databases.

So what is the solution then? Look for alternate payment options, if possible:-

1) Cash on Delivery (COD) – This is for the most paranoid. If the site offers a COD option, go for it. The money stays safe under your mattress until the product is delivered. And once the subscription ends, the delivery man can not practically enter your home to take some more of your money to renew that subscription.

2) Cheque – A cheque is still a very popular and safe way of payment. The only problem is the time it takes to getting a cheque cleared and the subscription to start. Especially in terms of e-magazines and e-books, it would be foolish to wait for a cheque to clear to be able to download something to your devices.

3) Net banking – This is also a very safe option, especially when coupled with a one time password (OTP) sent on your mobile number. This would stop unauthorized auto-renewals in their tracks.

4) Gift cards/Coupons – By buying gift cards or coupons first, and then using these to buy your subscriptions can prevent reuse once the subscription expires.

5) Disposable cards – Out of all the above, this one is what seems the most convenient and flexible. The above three options may not necessarily work especially in international sites or for payment in currencies other than rupees. Some sites may not even have payment through the above options, instead demanding only international credit cards. This is where disposable cards can be a powerful tool in your arsenal. Many banks (HDFC Bank Netsafe, Kotak Mahindra Bank, Citibank) now offer the facility of generating a one-time disposable card. This card can be generated using the netbanking site provided by the bank. This card not only has different details than your original card, but also you can limit the maximum amount of transaction on the card. This is an added layer of protection.

Once the card is used up, it doesn’t matter which site stores this information because the card is automatically disabled after first usage. Whenever you need to renew your subscription, you can always generate a new card and use that at the time of renewal. Since most magazine subscriptions would take place yearly, it is only once a year that you would have to undergo such a procedure (of course you will have to batch your magazine shopping in one go)

So in closing, if given an option, do not store your credit card information online. It takes hardly a minute to whip out your card every time you need to make a transaction. And it is a million times safer as well. In case you suspect that site will discreetly store your payment information without telling you so, generate a temporary credit card from your bank’s website and use that to make the payment. Lastly,  use non-CC based approaches if you have an option to do so. These may be a little less convenient but safer in terms of keeping your money with you.

#GOSFIndia

#BigBillionDay

If you’re aware of the above buzzwords, rest assured you are already part of the new e-commerce wave that is sweeping across India in recent years. Home grown sites like Flipkart.com, Snapdeal.com compete shoulder to shoulder well established international biggies like Amazon and Ebay (Both of them now have an India specific domain) with seemingly infinite pockets.

To buy a product, today a consumer can go online, compare the prices across a few sites, select the best deal and get the product delivered to his home in record time. This was, however, not always the case. I remember a time when online shopping was a very disorganized affair. Even if you managed to plod along the entire transaction completely, you had to twiddle your thumbs for days as you waited for the product to get delivered.

This experience was a remnant of the dotcom era. Just when the world was waking up to the new millennium, sites had cropped up by the dozens. Even in India there were countless dotcoms each trying to capture some niche market and trying to build a loyal customer base. A considerable part of these sites were e-commerce sites. But most of them failed to take off. Although there were many reasons why the dotcom bubble eventually burst, India in itself wasn’t ready completely for the online revolution. Given below are a few reasons why the revolution failed to take off in its first avatar:-

1) New mode of buying/Alien concept – For a country used to seeing the products in front of them before buying, and invariably bargaining before doing so, online shopping was an alien concept. Most of us would hesitate to buy products based only on a picture. Not having the product in front, and not being able to touch it was a deterrent to most from shelling out their hard earned money.

2) Not enough disposable income – India in the early 2000s was going through the IT revolution, with the IT field definitely one of the favourite areas to work in. But the amount of disposable incomes available to families was much lesser than the present day and age. Hence the target market to whom these online shopping websites could pitch to was limited.

3) Limited Internet access – If you remember, the early 2000s were still an era of dial-up connections and slow network speeds. People struggled with reliable connections back then, and it was improbable if not impossible for people to browse through e-commerce sites, compare products, expect online payments to go through reliably and then ultimately be able to track the order online. Logistics was also an ordinary affair at best, with products taking weeks to deliver in major cities, leave alone smaller towns.

4) Lack of security in online payments – Even for people who fit in the right demographic, who had a reliable internet connection and had enough money to spare, there was a limited and fragile infrastructure for online payments. Till today, the elders in the family are bound to discourage online payments due to the apparent lack of safety in buying online.

All of these reasons contributed to the boiling hot cauldron shrinking into a simmering stove. For a few years after the dotcom bubble burst, some e-tailers continued to provide strictly ordinary online shopping options (Some of these, rediff.com, indiatimes.com  and homeshop18.com are now but fringe players in today’s e-commerce boom.)

Cue forward to the present day, where consumer facing e-commerce is almost a $10 billion market. In the last five years, this industry is said to have grown at an astounding 50% annually. What are the factor that have contributed to this growth? Some of them are:-

1) Change in the demographic set up – In recent years, there has been a change in the demographic profile which has given rise to many more youngsters having disposable incomes. This group of people are also savvy with technology, including mobile and smartphones. This combination of discretionary spending plus staying connected always for that latest deal has proved to be a major boost for e-commerce.

2) Better connectivity – With broadband Internet spreading across office and homes in the country, people are more willing to transact online. Being able to buy from the comfort of their seats with reliable transactions is a major attraction. The spread of Internet in towns and villages will only increase the user base who goes online to shop for their favourite products.

3) Supporting infrastructure – With the improvements of supporting infrastructure like roads, warehousing facilities and transport services, online retailers have become more confident in providing next day deliveries to loyal buyers. This reduced TAT in getting  delivery of a product bought online has also increased the number of people turning to online shopping. The fact that online retailers generally quote lower prices is an added advantage.

4) Proactive regulator – The Reserve Bank of India (which in my opinion is one of the best central banks in the world) has set up strict guidelines for online payment systems and continues to be an active advocate of secure and dependable payment systems, especially for the end consumer. This focus by the RBI has played an equally important, if not greater, role in spreading the comfort with which Indians now transact online.

Of course, there are still teething problems that e-commerce v2 in India continues to face. India always has and will always face in the future a problem of undercapacity. Be it Google’s servers getting overwhelmed during last year’s GOSFIndia sale or Flipkart’s site going down during its recent Big Billion Day Sale. Also, with the increasing shift in the e-retailers business model towards an online marketplace (with independent vendors), there is also the problem of quality, reliability and spurious products. With the deep discounts and continuous sales, they are also not helping their bottomline in any way. Most of the VC-backed dotcoms continue to be in the red. But that was also the case with Amazon for years.

Judging from the popularity of both the events mentioned at the beginning, and the rate at which online retailers are pumping/increasing investments in India, this time around, India seems to be better prepared for the e-commerce boom. Warehouses are filled to the brim, delivery trucks are in transit and courier companies are on standby for the last mile delivery. But most important of all, the credit card limits of the consumers show no signs of maxing out anytime soon.