Find out how the currency ban is giving a boost to cashback apps 

From expenditure on local commutes and snacks to medical needs and weddings, irrespective of the expected long term benefits of the demonetisation, there is no denying that the move has put the common man in a sudden crunch. However, digital payment gateways are rejoicing, gaining users in droves by helping the urban consumer meet essential needs from groceries to food delivery.

While prominent e-commerce platforms, including Flipkart and Amazon, had even stopped cash-on-delivery services temporarily, and with food delivery platform Swiggy still not accepting cash, cashback platforms have come upon a great opportunity. There has been a hike in their usage among customers who have been depending on online payments since 500 and 1,000-rupee currency notes began being exchanged for notes of Rs 2,000, which are not easy to get change for. For cashback platform CashKaro, the groceries category has seen a 15 percent increase in orders since the demonetisation announcement on November 8^th.

Rohan Bhargava, co-founder, CashKaro, says, “Most people who shop online have bank accounts. CoD is their safety net; but now, they will resort to credit or debit cards.”

Story of the urban consumer

Digital payment apps are now seeing more downloads and greater usage figures. Sumit Agarwal, COO, Little App, says, “In the last seven days, there has been a twofold hike in transactions and a threefold hike in customers. Compared to a regular day, lower denomination amounts were more used than higher denomination ones – like tea and coffee for Rs 20 rather than a meal for Rs 1,000.”

Little App offers deals across categories like food, entertainment, last-minute hotels, health and wellness. The deals bought on the app get routed through the Paytm wallet and can be redeemed at the merchant outlet – without cash or debit/credit cards. But there is a need for wariness. Marketing expert Harish Bijoor says, “Those companies are used to a low number of transactions. Their backend has to be geared up to manage this current impact.”

And the trend might grow, especially with urban customers getting more comfortable with such transactions every day. Sumit says, “In three days, we got eight times more requests for partnership from merchants than normal –approximately what we get in a month - most of them from restaurants. Cashback ensures stickiness for them.” He adds that there has been particularly high demand during lunch and dinner as those who get cash back from a restaurant during lunch are more poised to have dinner there as well.

Various cashback options

The multifarious innovations in the fintech sector have never been more useful than they are now. Those who would use cash for cheaper meals at a canteen or mess where they have to pay by cash, for instance, can get discounted meals at a restaurant with the help of cashback platforms. App-only merchant discovery and privileges platform Crownit is one such option. It offers cashbacks at local merchants, which customers can redeem by shopping online, booking movie tickets or paying their bills. Crownit has over 900,000 users, with over 15,000 merchants listed on the O2O platform.

CouponDunia, which offers coupons, deals and discounts, also started cashback offers recently. Omni-channel marketplace Nearbuy enables users to discover things to do, eat and buy based on their location and preferences. NearU is another location-based mobile app for discovery and deals present in eight cities; it showcases real-time information under various categories.

Burnbill, another cashback rewards platform, enables customers to pay for any purchases at Burnbill stores with cashback, in part or in full. Burnbill doesn’t restrict you to one specific retailer or brand for earning or spending cashback, and comes with no expiry. You also earn additional cashback by referring Burnbill to your friends. Every time your referred members shop at any Burnbill store, you get a percentage of the cashback they earn. Burnbill has already tied up with more than 2,000 leading merchants across Mumbai, and has signed up over 50,000 members.

Hope for e-commerce

According to Assocham, the coupon-driven businesses in India account for about 20 percent of total e-commerce revenue. But, if one goes by the signs, this chunk is about to grow. E-commerce players are already offering multiple incentives to promote online payments, and the currency ban is certainly a boost. In e-commerce, with less CoD come better margins and RoI. Returns are usually lower on CoD orders than on those paid for online.

Rohan of Cashkaro believes that as e-commerce grows, usage of cashback platforms will grow too. “Not all customers have access to multiple choices of payment. But those going online now will find products that are cheaper and more convenient than in an offline store,” he says.

Monetary advantages help change consumer behaviour, as proven by the growth of e-commerce in the last few years. Rohan says, “The MRP of everyday items is reduced by cashback in online platforms. This is an incentive for carrying out that first online transaction. People are not cautious about Flipkart or Amazon anymore as they have built very strong brand equity in the market.” He hopes that even when normalcy returns with respect to currency, many people who are carrying out their first online transaction now might end up preferring paying online.

Not so rosy

While the government’s decision might be a step in the right direction towards a cashless economy, the lack of infrastructure at the grassroots level is handicapping local vendors and grocery sellers in rural areas. Rohan believes that the ideal stage will be reached when even mandis accept plastic money by default.

Presently, credit card acceptance is low among rural consumers. But Harish believes that the transition from a cash economy to a digital payment economy will happen first through wallets like Paytm and Freecharge, and then with users moving to credit cards. “Banks are already under pressure to cope with the demand for currency. Wherever cash comes into play, there will be an impact for a while,” he says.

Organised retail in India, which makes up only eight percent of the market, will not be overly affected as they mostly accept plastic money. But the remaining 92 percent - unorganised retail - will be disturbed because their inventory will not keep moving without cash. Even distributors of retail-oriented FMCG companies cannot offload at retail outlets.

Marketing games

While cashback platforms are hopeful of better business, their advertising strategies should be carefully devised. Harish says, “Today, everybody is trying to get their offerings experienced by the customer. But advertising must be explanatory and adoption-oriented. Shelf life might be longer for their ads, but it should be like a palliative in tough times.”

However, he adds that once this phase is over, the popularity of online orders will be maintained, even without cashbacks.

“Cashback is seen as an entry level lure. No digital wallet can afford to offer it forever. Even when it is withdrawn, there need not be an issue, because it is becoming a habit. So, there is no need to increase cashbacks now,” he says.

According to him, cashback works better on wallets than on brands as the impact depends on the category for the latter. “In terms of gross transaction value, there is no conversion hike,” he says.

Will the currency ban, despite all its flaws, change the way retailing is done in India? Only time will tell.