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Research Topic:

Conversion of Indian population from offline payment facilities to online payment facilities.

Introduction:

The conventional way of shopping has been treated as the most credible and widely preferred

way of buying by a lot of consumers in India which holds true till date for many. Earlier,

customers would simply walk into the stores, select goods they need and pay either by cash

or card. The best thing about old school shopping was that the customers always left with the

products they purchased right after payment. However today, a lot of shopping is done on the

internet which is considered easier and more convenient by many people.

The payment industry in India has observed significant alterations with the introduction of

the online payment system. This phenomenon and the growing significance of the online

payment sector is the result of the flourishing e-commerce industry, where the customers are

shifting from paper based payment mediums to online payment mediums. Their preferences

are moving towards transparency and flexibility as they are looking for better, more proactive

solutions around life events. The most preferred instrument for online payment in India has

been payment cards and payment directly from bank accounts (Net Banking) has been

picking up off late.

However, the thin lines between the online and offline mode of payment started blurring with

the constant evolution of technology and changing consumer behaviour. The retailers from e-

commerce and brick and mortar retail models started introducing the physical mode of

payment along with the electronic mode into their respective systems in order to give the best

of both the worlds to their customers. Cash on Delivery (COD) is currently one of the most
popular modes of payment among Indian online stores. The major reason for its popularity is

that the buyers can buy online and make the payment only after the goods are delivered to

them. With the e-commerce industry constantly evolving, the cash on delivery system will

require an alternate solution. A segment of buyers, who have the capability to pay

electronically, should be given an option for paying electronically at the time of delivery.

Before delving over the blurring lines, it is important to first understand the nature of both the

modes of payment. The definitions of both online and offline mode of payments are not very

obvious in the modern day scenario with the introduction of e-commerce in the retail

ecosystem and evolving transactional experiences.

The online mode of payment can be defined as a deal where the goods are booked on a web

portal and the payments are cleared electronically even before the buyer has received the

product.

An offline mode of payment can be defined as a transaction where the exchange between the

buyer and the seller is happening simultaneously. In this, the mode of payment would

be card on delivery, cash on delivery etc.

Nevertheless, both the modes of payment have certain advantages and disadvantages. Offline

payments are simple, intuitive & relatively more secure. With the emergence of NFC

payments, the simplicity and intuitiveness will be taken to a whole new level. However,

scalability of the ecosystem, ease of integration with core business applications and servicing

of the ecosystem are significantly more cumbersome and involve higher amount of

investments by the members of the ecosystem. There would also be restrictions in terms of

payments only during working hours.

On the other hand, online payments are able to overcome these hurdles. But in order to attain

the necessary levels of transaction security, the transaction experience takes a bit of suffering.

To add to that, some amount of apprehension always remains in case the payment is
happening before the delivery of goods / services. Payment via mobile wallets in the offline

space is also a good example of the blurring lines. More and more sellers today prefer to opt

for one stop solutions for all their payment needs. This may also lead to traditional online

payment solution providers to start offering offline payment solutions and vice versa.

Also, in order to expand the Point of Sale (POS) infrastructure for payment acceptance, the

incremental investments involved are not completely justifying the incremental returns. In

order to justify this incremental ROI, innovative solutions are required which will further blur

the lines between online and offline payments.

Problem:

What steps/measures may be adopted to increase the frequency of online payments

over offline payments in India?


How can the awareness towards the online payment facilities be increased?

Symptoms:

Expanding ecommerce industry.


Preference to online purchases amongst the younger generation.
Online payment facilities is yet to be implemented in most parts of India.
People living in remote areas are unaware of the online payment facilities.
Small transactions , even in metro cities still happen over cash.
Sense of security is high in offline transactions.
Rural parts of India still devoid of internet facilities.
Government now has started taking initiatives in promoting the usage of online

payment facilities.
Television ads, radio ads, newspapers, billboards & social media are the common

modes of promotion.
Research Objectives:

Determine the attitude of people towards online payment facilities over offline.
Determine the factors affecting the consumers choice of the mode of payment( i.e.

online or offline)
Determine the most effective mode of promotion of online payment system.

Literature Review:

Major Characteristics of Online Consumers

The typical Internet user of the twentieth century is young, professional, and affluent with

higher levels of income and higher education (Palumbo and Herbig, 1998). They value time

more than money which automatically makes the working population and dual-income or

single-parent households with time constraints better candidates to be targeted by non-store

retailers (Burke, 1997). Actually, both demographics and personality variables such as

opinion leadership or risk aversiveness are very important factors that are considered in

studies trying to determine the antecedents of Internet purchases (Kwak et al., 2002).

Confirmatory work shows that income and purchasing power have consistently been found to

affect consumers propensity to shift from brick-and-mortar to virtual shops (Co-mor, 2000).

Internet usage history and intensity also affect online shopping potential. Consumers with

longer histories of Internet usage, educated and equipped with better skills and perceptions of

the Web environment have significantly higher intensities of online shopping experiences and

are better candidates to be captured in the well-known concept of flow in the cyber world

(Sisk, 2000; Hoffman and Novak, 1996; Liao and Cheung, 2001). Those consumers using the

Internet for a longer time from various locations and for a higher variety of ser-vices are

considered to be more active users (Emmanouilides and Hammond, 2000). As Bellman et al.
(1999) mention, demographics are not so important in determining online purchasing

potential. Whether the consumer has a wired lifestyle and the time constraints the person has

are much more influential. Risk taking 14 propensity is also a powerful factor. E-shoppers

have higher risk taking tendencies. Consumers with high levels of privacy and security

concerns have lower purchasing rates in online markets but they balance this characteristic

with their quest for making use of the information advantage of the environment (Kwak et al.,

2002; Miyazaki and Fernandez, 2001). These educated individuals, as more confident

decision makers, are much more demanding and have greater control over the purchasing

process from initiation to completion (Rao et al., 1998).

Online Shopping Behaviour

Identifying pre-purchase intentions of consumers is the key to understand why they

ultimately do or do not shop from the Web market. One stream of research under online

consumer behaviour consists of studies that handle the variables influencing these intentions.

A compilation of some of the determinants researchers have examined are: transaction

security, vendor quality, price considerations, information and service quality, system quality,

privacy and security risks, trust, shopping enjoyment, valence of online shopping experience,

and perceived product quality. (Liao and Cheung, 2001; Saeed et al., 2003; Miyazaki and

Fernandez, 2001; Chen and Dubinsky, 2003). The lists of factors having a positive or

negative impact on consumers propensity to shop do not seem to be very different from the

considerations encountered in offline environments. However, the sensitivities individuals

display for each variable might be very different in online marketplaces. Factors like price

sensitivity, importance attributed to brands or the choice sets considered in online and offline

environments can be significantly different from each other (Andrews and Currim, 2004).

Uncertainties about products and shopping processes, trustworthiness of the online seller, or
the convenience and economic utility they wish to derive from electronic shopping determine

the costs versus the benefits of this environment for consumers (Teo et al., 2004). Further

studies aiming to complete the full set of factors influencing consumers pre-purchase

intentions are still much awaited.

Advantages and Disadvantages of Going Online

The excitement created by the unique and innovative characteristics of the Web created a

tendency to focus on the advantages created by the medium at first. However, contrary points

also emerged rapidly and the pros and cons of going online began to be discussed

simultaneously. The operational advantages of being online mentioned by many studies

create an extensive list: becoming easily accessible from different parts and time zones of the

world, being introduced to global business opportunities, decreased red tape in 19

international operations, possibility to conduct personalized, effective and interactive

advertising, the availability of marketing research and analysis tools, lower capital and

overhead costs, lower operating costs, decreasing cost of capital, tax advantages, increased

efficiency in business-to-business transactions, flexible ordering, better order tracking,

Fevelling the playing field with other firms, enhancing the firms image by appearing to be

on the cutting edge of technology, and reaching a larger audience of prospective clients (Paul,

1996; Rosen and Howard, 2000; Rozgus, 2000; Elfrink et al., 1997). However, the

disadvantages of going online are just as prevalent and, therefore, the authors of studies that

discuss the pros of e-business have shown an equal effort to note the negative sides of going

cyber. Privacy and security problems, various operational, strategic and cost-based

disadvantages, the difficulty of controlling online transactions and measuring outcomes, high

costs of entering e-business, the difficulty of setting prices at an international level,

intensified competition, cultural differences, differences in international trade laws, changes


between the telecommunication infrastructure and technical standards of different countries,

high costs of individual delivery, the difficulty of dealing with virtual transactions, problems

about disintermediation, the fear of technology most consumers experience, the lack of

socialization and tactility are only some of the most commonly encountered disadvantages of

becoming an online business (Paul, 1996; Rosen and Howard, 2000). Therefore, companies

need to implement a strict structure to determine the costs and the financial outcomes of

going online in order to be sure that the pros exceed the cons for their business and firm

(Zeller and Kublank, 2002).

Ethical Issues, Privacy and Security Concerns-

The Internet was originally designed to be an environment accommodating a free flow of

communications (Paul, 1996), thus, the legal framework for Web-based transactions are

incomplete, unclear or contradictory (Wijnholds and Little, 2001). There is no governing

body in this platform and handshake standards are used, which can work only as long as users

have an implicit agreement to cooperate and show respect for one an-other (Umbaugh, 1996).

Although there are many governmental and non-governmental units working to develop

generally applicable legal impositions and rules for the cyber market, ethical concerns and the

perceived risks about privacy and security problems remain as the single most important

factor deterring consumers from engaging in commercial transactions in the online market

without hesitation. Privacy One of the most commonly mentioned problems about online

markets is the intrusion of privacy, which refers to the improper access, collection,

monitoring, analysis, transfer and storage of confidential consumer information (Bloom et al.,

1994). The power of technology might be intentionally abused by marketers for the purpose

of improving their market knowledge and response mechanisms. Thus balancing beneficial

use of data sources with the privacy rights of individuals is one of the most challenging
public policy issues of the information age (Wang et al., 1998) since consumers have to give

up some privacy in exchange for the benefits of the Web (Robertson and Sarathy, 2002). 22

This created a tendency to discuss how consumers could be protected as well as how firms

could reduce privacy and security concerns of individuals. There are many studies offering

guidelines to win the trust of consumers, discussing the importance of applying FTC

principles or evaluating the current technologies that can protect people from privacy and

security concerns (Kiely, 1997; Gregoire, 2002; Robertson and Sarathy, 2002). The frequently

mentioned FTC principles are about forewarning consumers about information collection

practices, giving them the chance to decide how their data should be used, giving them access

or correction choices to make them feel more secure. Gauzente and Ranchhod (2001) add the

length of time for which companies can access consumers information and the degree of

intrusiveness as additional factors. It is true that there is a long list of technological tools and

methods mentioned in various studies like anonymizers and crowds giving consumers the

power to disguise themselves, 22ncryption technologies for coding confidential information,

digital signatures ensuring authorship, or firewalls that prevent outsiders from tapping into

unauthorized areas (Cranor, 1999; Reiter and Rubin, 1999; Gray, 1996; Meeks, 1999; Cooper

et al., 1996; Paul, 1996). However, most online consumers do not have the technical

knowledge to understand how these tools protect them. Therefore, it is essential to

communicate this information to the consumer and educate and encourage them about using

these tools to protect themselves. In this respect, research that could clarify the state of

consumer knowledge and the level of voluntary usage of protection mechanisms by online

consumers could be very enlightening. Some studies mention the importance of self-

regulation and transparency policies that can be used to supplement technology-based tools of

protection. Companies can emphasize the importance they give to doing ethical business,

subscribe to regulation programs, abandon collecting unnecessary information, state all terms
of contract and let the benefit go to the customer in case of doubt, provide all contact

information, answer questions fast and personally, and stick to the basic privacy principles of

FTC but, ideally, self regulation is preferred since universal legal control is not practical

(Peeples, 2002). 23 These principles are impressive but adherence to them is not an adequate

condition; they must be supported with the suitable technology. However, some firms are still

not adopting new protection technologies since effective security products are so costly and

hard-to-use (Lunt, 1996) regardless of how many consumers they might be losing through

this ignorance. A more current approach raises a lot of hopes in terms of securing Web sites

and consumers: seals of approval. Although certifying companies with respect to how much

they adhere to certain security standards seems to be a very effective solution, one interesting

finding about this subject is quite disappointing. While seals of approval affect consumers

positively in terms of disclosing more information, they do not significantly increase firms

adherence to privacy policy standards (Miyazaki and Krishnamurthy, 2002). Thus, seals

reduce some of the concerns consumers have about online purchases, especially if the

assurance company is recognized by the consumer, but they do not solve the security problem

radically on the consumers mind (Odom et al., 2002). It is left to the shoulders of marketers

to make consumers understand that too much fear of privacy and security problems makes it

impossible to engage in any commercial activity online. If marketers do not use any tracking

mechanism to record information about consumers such as cookies, it will be impossible to

offer personalized offerings or services to them and the Web market will be stripped off its

major advantages (Phillips, 2002; Cunningham, 2002). Though there is plenty of evidence

showing that consumers with higher levels of Internet experience have less privacy and

security concerns about online shopping (Miyazaki and Fernandez, 2001), novel or amateur

users can also be triggered by communicating this understanding to them.


Research Hypothesis:

Increasing the security features would lead to an increase in the adoption of the online

payment system.
Encouraging online over offline transactions would lead to an increase in the adoption

of the online payment system.


Preventing the threat of misuse of personal data would lead to increased security of

the online payment systems.

Research Design/Technique:

The research is a Qualitative research and the research design is an Exploratory research

design. An interactive survey approach has been used.

Research Questionnaire:

1. Are you aware of the online payment facilities?

Yes
No

2.Which mode in general is your preferred mode of payment?

Online
Offline

3.There is always a threat of misuse of personal data in online transactions.

Strongly Agree
Agree
Disagree
Strongly Disagree

4.Online transactions are insecure.

Strongly Agree
Agree
Disagree
Strongly Disagree

5.Online payment system should be encouraged over offline payment system.

Strongly Agree
Agree
Disagree
Strongly Disagree

6.What is your preferred mode to make your online payments?

Debit Card
Credit Card
Netbanking
Paytm
Other

7.Online payment system should be more transparent to increase the probability of its
adoption.

Strongly Agree
Agree
Disagree
Strongly Disagree

8.Do you feel that giving offers and discounts on online payments may increase its usage?

Yes
No

9.Do you feel that the government should play a more active role in the promotion of the
online payment system?

Yes
No

10.Which mode of advertisement influences you the most?

Newspaper
Television ads
Social Media sites
Billboards
Other
SPSS Analysis & Interpretation:

Variables Entered/Removed(b)

Variables Variables
Model Entered Removed Method
1 Online
transactions
. Enter
are
insecure(a)
a All requested variables entered.
b Dependent Variable: Choice of the mode of payment(i.e.online or offline)

Model Summary

Std. Error
Mode Adjusted of the
l R R Square R Square Estimate
1 .236(a) .056 .048 .43690
a Predictors: (Constant), Online transactions are insecure

ANOVAb

Sum of
Model Squares df Mean Square F Sig.
1 Regression 1.297 1 1.297 6.794 .010a
Residual 21.951 115 .191
Total 23.248 116
a. Predictors: (Constant), Online transactions are insecure
b. Dependent Variable: Choice of the mode of payment(i.e.online or offline)

Coefficientsa

Unstandardized Standardized
Coefficients Coefficients
Model B Std. Error Beta t Sig.
1 (Constant) .398 .132 3.002 .003
Online transactions
.196 .075 .236 2.607 .010
are insecure
a. Dependent Variable: Choice of the mode of payment(i.e.online or offline)

From the Annova table we can see that the significance value is less than the value of
alpha(.05), hence we may reject the null hypothesis that the model is insignificant. The value
of adjusted R square is .048 which means that there is 4.8% variablility caused in the
dependent variable due to the independent variable. Further from the coefficients table we
may see that the significance value(.01) is less than alpha(.05) which again means that the
variable is significant.

Variables Entered/Removed(b)

Mode Variables Variables


l Entered Removed Method
1 Online
transactio
ns should
. Enter
be
encourage
d(a)
a All requested variables entered.
b Dependent Variable: Choice of the mode of payment(i.e.online or offline)

Model Summary

Std. Error
Mode Adjusted of the
l R R Square R Square Estimate
1 .274(a) .075 .067 .43246
a Predictors: (Constant), Online transactions should be encouraged

ANOVAb

Sum of
Model Squares df Mean Square F Sig.
1 Regression 1.740 1 1.740 9.306 .003 a
Residual 21.507 115 .187
Total 23.248 116
a. Predictors: (Constant), Online transactions should be encouraged
b. Dependent Variable: Choice of the mode of payment(i.e.online or offline)

Coefficientsa

Unstandardized Standardized
Coefficients Coefficients
Model B Std. Error Beta t Sig.
1 (Constant) .939 .080 11.692 .000
Online transactions
-.190 .062 -.274 -3.051 .003
should be encouraged
a. Dependent Variable: Choice of the mode of payment(i.e.online or offline)

From the Annova table we can see that the significance value(.003) is less than the value of
alpha(.05), hence we may reject the null hypothesis that the model is insignificant. The value
of adjusted R square is .067 which means that there is 6.7% variablility caused in the
dependent variable due to the independent variable. Further from the coefficients table we
may see that the significance value(.003) is less than alpha(.05) which again means that the
variable is significant.

Variables Entered/Removed(b)

Mode Variables Variables


l Entered Removed Method
1 Threat of
misuse of
. Enter
personal
data(a)
a All requested variables entered.
b Dependent Variable: Online transactions are insecure

Model Summary

Std. Error
Mode Adjusted of the
l R R Square R Square Estimate
1 .536(a) .288 .282 .45657
a Predictors: (Constant), Threat of misuse of personal data

ANOVAb

Sum of
Model Squares df Mean Square F Sig.
1 Regression 9.686 1 9.686 46.466 .000 a
Residual 23.972 115 .208
Total 33.658 116
a. Predictors: (Constant), Threat of misuse of personal data
b. Dependent Variable: Online transactions are insecure
From the Annova table we can see that the significance value(.000) is less than the value of
alpha(.05), hence we may reject the null hypothesis that the model is insignificant. The value
of adjusted R square is .282 which means that there is 28.2% variablility caused in the
dependent variable due to the independent variable. Further from the coefficients table we
may see that the significance value(.000) is less than alpha(.05) which again means that the
variable is significant.

Variables Entered/Removed(b)

Variables Variables
Model Entered Removed Method
1

Mode of
Promotion,
Online
transactions
should be
more
transparent,
Government
should play
amore
active role
in
promotion,
Preferred
mode of
payment in
online
. Enter
transactions
, Offers and
discounts
on online
payments,
Online
transactions
should be
encouraged
, Online
transactions
are
insecure,
Threat of
misuse of
personal
data(a)

a All requested variables entered.


b Dependent Variable: Choice of the mode of payment(i.e.online or offline)

Model Summary

Adjusted R Std. Error of


Model R R Square Square the Estimate
1 .411(a) .169 .107 .42296
a Predictors: (Constant), Mode of Promotion, Online transactions should be more transparent, Government
should play a more active role in promotion, Preferred mode of payment in online transactions, Offers and
discounts on online payments, Online transactions should be encouraged, Online transactions are insecure,
Threat of misuse of personal data

ANOVA(b)

Sum of
Model Squares df Mean Square F Sig.
1 Regression 3.927 8 .491 2.744 .009(a)
Residual 19.321 108 .179
Total 23.248 116
a Predictors: (Constant), Mode of Promotion, Online transactions should be more transparent, Government
should play amore active role in promotion, Preferred mode of payment in online transactions, Offers and
discounts on online payments, Online transactions should be encouraged, Online transactions are insecure,
Threat of misuse of personal data
b Dependent Variable: Choice of the mode of payment(i.e.online or offline)

Coefficientsa

Unstandardized Standardized
Coefficients Coefficients
Model B Std. Error Beta t Sig.
1 (Constant) .484 .178 2.717 .008
Threat of misuse of
-.076 .077 -.114 -.985 .327
personal data
Online transactions
.229 .089 .276 2.570 .012
are insecure
Online transactions
-.195 .063 -.281 -3.106 .002
should be encouraged
Preferred mode of
payment in online -.041 .036 -.104 -1.144 .255
transactions
Online transactions
should be more .051 .078 .060 .655 .514
transparent
Offers and discounts
.065 .073 .083 .889 .376
on online payments
Government should
play amore active role .001 .205 .001 .006 .995
in promotion
Mode of Promotion .064 .058 .103 1.110 .269
a. Dependent Variable: Choice of the mode of payment(i.e.online or offline)

From the Annova table we can see that the significance value(.009) is less than the value of
alpha(.05), hence we may reject the null hypothesis that the model is insignificant. The value
of adjusted R square is .107 which means that there is 10.7% variability caused in the
dependent variable due to the independent variable. Further from the coefficients table we
can infer that the two significant variables are online transactions are insecure & online
transactions should be encouraged.

Statistical Analysis & Key Findings:


Regression Analysis has been used to establish relationship between the dependent

variable & independent variable.

Security features has a significant relation with the choice of adoption of online

payment system.

Encouraging online payment over offine has a signficant effect on the adoption of the

online payment system

Threat of misuse of personal data has a significant effect on the security of the online

payment system.

Conclusion:

The adoption of Online payment system can be increased by:

Increasing the security features

Encouraging online transactions over offline transactions

Preventing the threat of misuse of personal data.

Contents
Research Topic:...................................................................................................... 1
Introduction:.......................................................................................................... 1
Problem:................................................................................................................ 3
Symptoms:............................................................................................................ 3
Research Objectives:............................................................................................. 4
Literature Review:.................................................................................................. 4
Major Characteristics of Online Consumers ......................................................4
Online Shopping Behaviour .............................................................................. 5
Advantages and Disadvantages of Going Online .............................................6
Ethical Issues, Privacy and Security Concerns-...................................................7
Research Hypothesis:.......................................................................................... 10
Research Design/Technique:................................................................................10
Research Questionnaire:...................................................................................... 10
SPSS Analysis & Interpretation:........................................................................... 12
Statistical Analysis & Key Findings:......................................................................18
Conclusion:.......................................................................................................... 18

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