View of A COMPARATIVE STUDY OF DIFFERENT PAYMENT OPTIONS OF ONLINE SHOPPING WITH SPECIAL REFERENCE TO INDORE CITY

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Vol.03, Issue 09, Conference (IC-RASEM) Special Issue 01, September 2018 Available Online: www.ajeee.co.in/index.php/AJEEE

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A COMPARATIVE STUDY OF DIFFERENT PAYMENT OPTIONS OF ONLINE SHOPPING WITH SPECIAL REFERENCE TO INDORE CITY

Syed Razia Sultana Research Scholar at DAVV Dr. Kumbhan Khandelwal Prof Commerce Department

Shri Atal Bihari Vajpayee Government Arts and Commerce College, Indore (MP) Abstract: - Due to large scale growth in the Indian ecommerce sector with increased participation from people across the country. This industry will continue to drive more employment opportunities and contribute towards creating more entrepreneurs through the ecommerce marketplace model. Demonetisation and a reduction in cash transaction, along with improved Digital transaction facilities, can actually throw up opportunities for the Indian.Due to this it is required to study the different payment options of online shopping.

The outcome of which will suggest to online retailers to develop their strategies regarding payment options. The main objective of this study is to find the most popular payment option among various payment options in online shopping.Result of our study showed that Cash on Delivery is the preferred payment options but adoption of online payment is also growing especially E-wallet. The results of the study could be further used by the researchers and practitioners for conducting future studies in the Tier II cities of India.

Key words: - Online Shopping, Mode of Payment in Online shopping.

1. INTRODUCTION

Recent years have witnessed the wide spread commercial usage of Internet and fundamentally revolutionized the world of shopping.

As per an ASSOCHAM-Resurgent joint study, online shopping is expected to clock annualised growth of 115% this year, aided by fast increasing data consumption and improvement in logistics, along with number of offers presented by e-commerce platforms. (DB Post, 2018)

Online shops provide us opportunity to shop round the clock of 24/7, 7 days of week and 365 days, freedom to shop at your convenience and pace. On placing the order by customers, Retailers has just to send the product on their address and collect payment either through online mode of payment or offline mode of payment.

Online payment occurs when a customer’s fund are transferred to sellers account right after customers confirms the payment. Online customer will pay through credit card, debit card, net banking etc.

Offline payment methods donot charge the customer at a time. Collecting payment is not immediate in this method.

Example of Offline payment methods are Cash on Delivery, a customer deposit a cheque into bank etc.

2. LITERATURE REVIEW

(Schreyer, 2014) Their study was based on the online consumers of UK. They stated that one element which is regularly overlooked comes at the very end of the customer’s shopping journey and is in fact one of the main reasons for basket abandonment was the payment process.

According to their research, 68% of UK consumers have abandoned an online retail site simply due to the payment process. Over half of these (57%) left because the process was too complicated, while 46% didn’t complete the transaction as the merchant didn’t offer them their payment option of choice.

The main objective of their research is to study, especially what is the major option for payments in online shopping. There is several option of payment in online purchasing such as credit card, debit card, cash on delivery, EMI option, gift voucher or wallet. The main object of their research is to identified various payment option in online shopping and the result showed that most of the respondents using cash on delivery option because of its easy to use .On second number people use debit card option because it’s easily availability and use. According to their research net banking also become popular among people. Credit card and EMI option is following net banking.

(Nielsen, 2016)Their survey report stated that In India, debit cards and

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2 direct debit are common payment methods (71% and 61%, respectively) for online shoppers, but cash on delivery is the most widely used option, cited by 83%

of online respondents. They also stated that popularity of cash on delivery is driven by a few factors. There is a sizeable group of unbanked consumers in India, credit card penetration is relatively low, and many consumers avoid paying with plastic due to security concerns.

Moreover, e-commerce is still in its early stages of development in the country, and the ability to touch, feel and try on merchandise prior to purchasing reduces the risk of not getting what they paid for.

(Khan, Olanrewaju, & Baba, 2017)The statistics shown by their study signify that the number of customers employing online mode of payment and making online transactions are continuously growing. Their study concludes that a better integration of online payment systems with the present financial and telecommunication infrastructure is necessary for a propitious future of this payment mode.

They also suggested that establishing a common standard for a variety of service providers, improving the compatibility with a large number of customers, overcoming privacy and security concerns and employing the latest technology could facilitate expeditious adoption of online payment methods and expand the market for such a mode of payment.

(Vally & Divya, 2018) Their study explained about the importance of Digital Payment in India. They stated that the demonetization resulted in tremendous growth in digital payments. With the government initiative such as Digital India and increased use of mobile and internet are means to exponential growth in use of digital payment. The objective of their research paper was to study the positive impact that Digitization of payment system. Their research paper focuses on the analysis of the adoption level of these digital payment systems by customers.

Primary data was collected from 183 respondents in Hyderabad. The collected data through the questionnaire were analysed statistically by using chi-square technique. The study examines the effect of adopting digital payments impact on consumers of the banking sector of India.

Result of their study reveals that age plays an important role in the adoption of

digital payments and proved that this is positively correlated with age and more educated people are expected to have more favourable attitudes towards adoption of innovations. Result of their study also indicate that the deployment of technology for digital payments have improved the performance of banking sector and able to achieve the motive cash less country. The study gives emphasis to the percentage of awareness on maximum utilization of technology. Banks should take effective measures in creating awareness towards the effective usage of technology and security.

3. RATIONALE OF THE STUDY

The year 2017 have been witnessed large scale growth in the Indian ecommerce sector with increasedparticipation from people across the country. This industry will continue to drive more employment opportunities and contribute towards creating more entrepreneurs through the ecommerce marketplace model," the report said.It also said that demonetisation and a reduction in cash transaction, along with improvement of net banking facilities, can actually throw up opportunities for the Indian. (The Economic Times, 2017)

To offer conceivable payment method available, Online Retailer will have to take a look at their target audience to see which payment methods they use. Due to this it is required to study the different payment options of online shopping. The outcome of which will suggest to online retailers to develop their strategies regarding payment options.

Following are the some popular method of payment in online shopping:-

1. Cash on Delivery

It is one of the most preferred payment method in India. Cash on delivery, also known as collect on delivery.COD allows the purchaser to pay at the time of delivery rather than in advance/at the time of purchase. If payment is not made at the time of delivery, the product is returned to the originating company with no further obligation from the buyer. (INVESTOPEDIA, n.d.)

2. Debit card

A debit card (also known as a bank card, plastic card or check card) is a plastic

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3 payment card that can be used instead of cash when making purchases. It is similar to a credit card, but unlike a credit card, the money comes directly from the user's bank account when performing a transaction.(WIKIPEDIA, n.d.). If a customer opt to pay through debit card he/she should select Debit Card as payment option. Customer have to give all the necessary information of Debit card on bill desk of the shopping web site.

When a consumer uses a debit card, the money comes directly from his/her Bank account.

3. Credit Card

A credit card is a plastic card issued by a financial institution that allows its user to borrow pre-approved funds at the point of sale in order to complete a purchase.

Credit cards have a maximum amount or credit limit the user can borrow during a given period. The credit limit is pre- determined by the card issuer based on the cardholder's credit rating and credit history. (INVESTING ANSWERS, n.d.) In online shopping when the customer opt to pay via credit card than customer have to give all the necessary information ofcredit card on bill desk of the shopping web site.

4. E- Banking

It is also known as Online Banking, Internet banking, Virtual banking, net Banking etc. E-banking is defined as the automated delivery of new and traditional banking products and services directly to customers through electronic, interactive communication channels. E-banking includes the systems that enable financial institution customers, individuals or businesses, to access accounts, transact business, or obtain information on financial products and services through a public or private network, including the Internet(Jindal, 2016). For using E- banking facility user have set up an Id and password. By using this ID and password customer can pay the required amount.

5. EMI option

Customer can use Equated monthly instalment (EMI) shopping option to pay for their order in -easy instalments. EMI is one of the payment methods available on most of the popular websites like Amazon, Flipkart etc. Online shopping website will also provide the EMI option

with a table of EMI providers along their corresponding rates and tenures offered, if the order of the customer is eligible for purchase on EMI

6. E- wallet

E-wallet is a type of electronic card which is used for transactions made online through a computer or a smartphone. E- wallet is a type of pre-paid account in which a user can store his/her money for any future online transaction. An E-wallet is protected with a password. With the help of an E-wallet, one can make payments for groceries, online purchases, and flight tickets, among others. (THE ECONOMIC TIMES| EWALLETS, n.d.). It is also known as Digital Wallet.

The demonetization of ₹ 500 and

₹ 1000 currency notes has been working largely in the favour of digital wallet start- ups. India has seen a phenomenal increase in the number of digital wallets and is slowly moving towards being a cashless country. And with the transaction limit on digital wallets being increased to ₹ 20,000, it just keeps getting better. (E-WALLET PAYMENT, n.d.). Some of the well-known Digital Wallet in India are Mobikwik, Paytm, Freecharge, JioMoney etc.

Objectives of the study:

To study the payment options available in online shopping.

To study the level of awareness and usage of payment options.

To find the most popular payment option among various payment options in online shopping.

4. RESEARCH METHODOLOGY Research Design

The design in this study is descriptive in nature. Descriptive research is defined as a research method that describes the characteristics of the population or phenomenon that is being studied.Descriptive research design involves observing and describing the behaviour of a subject.

Population of Study

Population of study comprised with the residents of Indore City doing online shopping. Individuals who have been doing online shopping since last one year or more than one year were targeted for the study.

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4 The Sample

In this study, the sampling unit was the online shopping customers who had an account done online shopping of goods or services on online shopping websites.

Convenience sampling method was adopted to select the customers.

The Sample Size

The sample size was 200. For research work, information concerning payment options opted for online shopping. The customers’ were requested to reply to all the questions to the best of their knowledge. Out of 200 questionnaires we got only 163 responded back. Overall response rate was 81.5%. After data collection, we coded it in SPSS.

The tools for data collection

A questionnaire was made to collect Primary data. It was designed following review of the literature based on payment options available for online customers. It consisted of 9 questions.

The tools for Data Analysis: - The analysis of collected data was done by MS-Excel.

Data analysis and interpretation

In data analysis and interpretation method of Percentage, Pie chart, Bar graph and tables is used to analyse the data.

In this survey In the Questionnaire first 5 questions were asked about demographic detail such as Sex, Age, Education, Occupation, Income and remaining questions related to payment options in Online shopping.

5. RESULT AND DISCUSSION

Out of 163 respondent 91 are male and 72 are females. Figure 1 show the sex ratio of respondents. Figure 2shows the different age group of the respondents.

Figure 1

Figure 2

Out of the total number of respondents (163 respondents) in the survey 45 % were in the age bracket of 18 to 30 years, followed by consumers of 30-45 years of age (31%) . Consumers with above 45 years of age were 35%.The result proves that most of the respondents of research are using online shopping and the major age group which shop online is 18-30 years. Percentage of under graduate and graduate were 69.94 % and post graduate or above were 28.83%%.Among all the respondents only 14.11% reported that their monthly income was more than ₹ 25000. The demographic analysis of the respondents is given in Table 1, 2 and 3.Only 16.56% respondents wereaware about 6 payment options i.e. were Cash on delivery, Debit card, Credit card, Net banking, , EMI and E-wallet. Figure 3 shows number of options. Only 5 respondents (3.07%) have used all these 6 options while doing online shopping.

Figure 3 shows the various options of payment preferred by Respondents along with number of respondents who preferred.

Male 56%

Female 44%

0%

Sex ratio of respondents

Male Female

18-30 years 31-45 45%

years 31%

46 years and above

24%

Different Age of respondents

18-30 years 31-45 years 46 years and above

91

24 5 3 12 28

0 50 100

Payment Options

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5

Payment Options Frequency Percentage Cash on Delivery

Debit Card Credit Card Net banking EMI E-Wallet Total

91 24 5 3 12 28 163

55.83 14.72%

3.07%

1.84%

7.36%

17.18%

100%

Cash on Delivery is still preferred by most the respondents because of its feasibility and risk free nature of payment transaction. On second number people preferred E-wallet followed by debit Card.

Most of the respondents’ response that they preferred E-wallet due to various offers and discounts provided by them.

Credit card and Net banking is the least preferred options among people shows the research. The number of credit card as compare to debit card.

Respondents who preferred EMI option, they all were opted debit EMI options.

Credit card holder is also very less as compare to debit card holder. India had 36.2M credit cards, 846.7M debit cards in January 2018. (Verma, 2018)

5.1 Limitations of the study

Despite of all sincere efforts, the study still has some unavoidable limitations.Firstly, the study is limited to online shoppers of Indore city only. Only 6 payment options were considered. Data pertaining to the study has been collected for a period of only 4 Months.

6. CONCLUSION AND SUGGESTION Indian Consumers in India are still doubtful to use credit cards, Debit Cards online due to fraud risks. Retailers with high COD orders may face higher cancellation rates due to the consumer refusing the order. Because there is a gap of one or more days between dates of order placed by the customer and date of the delivery. May the consumer change his/her mood or not be satisfied with their purchase or delay in delivery refuse payment. In such a case, the seller is responsible for all costs associated with the return of the item, increasing logistics costs.

But gradually people starts adopting online payment method. As in our research despite of Cash on delivery i.e. is one of the example of offline payment mode other 5 options related to online payment and the percentage of

%online payment options (Debit Card,

Credit Card, EMI, Net Banking, and E- Wallet) is 44.17%. But in this major contribution is of E-Wallet.

Now, it is the time where people is turning towards the best alternative to paying their bills and do some purchasing with the E-wallets.

A secure E-wallet can manage all your finances with one click and providing all types of facilities to settle all your amounts online as well as an offline transaction with ease.

The E-wallets like Paytm, Mobikwiketc are encouraging all to the way to the cashless economy for a long time. E-retailer should provide as many Payment Options as Possible. Now days Consumers have more choice than ever before in terms of how they actually pay for goods and services.According to Business Insider, lengthy or complicated checkout processes account for close to 39% of US shopping cart abandonments. In order to increase conversions, it is important to offer a simple payment process. The easier the payment process, the higher the conversion rates(Feinstein, 2017).Ask for Essential Information Only. Improving payment processes need not be complicated and time consuming. There should be a few simple steps that retailers need to consider.Security in payment systems is of the utmost importance.

However, tight security can result in legitimate payments being declined, effecting conversion rates and profits (Feinstein, 2017).

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Annexures

Table 1 Age Group

Age Group Frequency Percent

18-30 years 73 45%

30-45 years 51 31%

Above 45 years 39 24%

Total 163 100%

Table 2 Education

Education Frequency Percent

Higher Secondary 2 1.23%

Under Graduate 61 37.42%

Graduate 53 32.52%

Post Graduate and

above 47 28.83%

Total 163 100%

Table 3 Income per month

Income Frequency Percent

Below 10000 87 53.37%

10000-25000 53 32.51%

25000 or Above 23 14.11%

Total 163 100%

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