World News: Asia-Pacific: Cash is king for Indian e-commerce
Financial Times, July 12, 2000

"Cash is the way forward," Rohit Varma, vice-president of brand marketing for Rediff.com, said yesterday. The company, launched four years ago and the only Indian Internet portal to be listed on Nasdaq, has just announced a deal that provides a cash-on-delivery service for Internet purchase.

Elsewhere in the world credit cards are the common currency of buying on the web, but India's 1bn-strong population has only an estimated 3.5m-3.8m cards with an estimated spending of only Rs 1,800 (Dollars 40) per card per month.

"Cash on delivery will accelerate online shopping. The service is important in a country where the number of Internet users is growing yet credit card penetration is low." said Ajit Balakrishnan, chairman and managing director of Rediff.com.

The portal's deal with Elbee Services, an associate of US-based delivery company UPS, means Elbee will deliver goods ordered on the Internet through Rediff's website to customers is one to three days and will pick up the cash payment at the same time. The service will be available at 800 locations in urban and rural India.

Total e-commerce was only Rs 4.5bn in fiscal year 1999-2000, according to Dewang Mehta, president of the National Association of Software and Service Companies (Nasscom), and there were only 770,000 subscribers to the net. However, India is girding itself for an e-commerce explosion with growth of as much as 500 per cent in the next year. "We are now saying e-commerce volumes will zoom up to Rs 25bn, or more, by 2000-2001." said Mr Mehta. Some analysts predict as many as 40m internet users in five years.

"This is exactly what is required in the country, where credit cards have not taken off. And it is a moot point whether they ever will take off," said Mr Varma.

"There are entire segments which are denied credit cards, for example students and even some professionals are not allowed to have them." Mr. Varma said that Indian banks had the perception that some groups of people-such as IT professionals - might run up debts on credit cards and then leave the country.

Though the CoD scheme might seem a step backwards in the high-tech world of e-commerce, it may make some sense in a India. Banks offer a door-to-door cash delivery service, people often keep substantial sums of cash at home, and even very large transactions are regularly made in cash.

There is one other advantage for this system in India. Anyone who can afford a PC is also likely to have servants and so there will always be someone at home to take the delivery.