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Expanding the outreach of credit cards for payments to smaller shopping establishments as well

Credit Cards

Credit Cards

Through an article published in News Week dated January 18, 2010 it was informed that the sale of small retailers in USA and in England increased by more than 5% when they introduced the system of making payment for purchase through credit cards. The article also informed that, in particular, sale of clothes, gifts or other non-essentials in most of the cases arose by more than 10 percent, the disposable commodities in which the young generation of today likes to splurge in.

For a country like India, which is dominated by small shopping outlets, called as mom and pop stores, it indeed is a valuable learning worth emulation.

Government has always been on the lookout for increasing its revenues, however this aspect has not been given the desired attention so far. It would be instructive to study the tax collection from the malls which encourage card payment, and the thing would be crystal clear that the sooner the system of online payments is introduced, better it would be for the government to increase its revenue. Service sector provides maximum indirect tax and with the demand for funds increasing for implementation of social development programmes, need for introduction of innovative methods is indeed the need of the hour.

Commercial banks need to be roped in for the initiative, and they ought to be encouraged to facilitate installation of card swiping machines at mom and pop stores. India as a country has become a hotbed for introduction of fake notes, and it can be curbed to a great extent if more and more transaction is shifted to cashless mode.

There would be a resistance from shopkeepers and even big stores, particularly in North India, as they ask the shoppers to pay the service charge of 1.5-2 % that the banks charge from them for facilitating card based payment process. South India and Western Indian shopkeepers be it big or small have adopted to card payment processes in a big way.

The shopkeepers need to understand that the present generation is not a cash generation but a card generation who can swipe the card with impunity but hates to carry cash. With cards he is ready to indulge in impulsive shopping as well, otherwise not possible with the amount of cash that one can carry.

Therefore, the shift to card based payment system is indeed an idea whose time seems to be arriving.  It could be a moment of disruption and would face opposition, but it needs to be tested as it is a creative disruption. If  India is to become a global economy then facilitation of credit cards based payment process in a big way, is indeed the need of the hour.

Besides, with transactions being conducted through card swipes, it would also force the shopkeeper to issue bills for each sale.  Government has been trying for quite some time to educate the customers and encouraging them to demand bill, this initiative by the Government could force the shopkeepers to issue bills.  Once the bills are issued, incidence of spurious goods being sold through the small outlets could also come down.  Therefore the idea is worth experimenting.  Would this become the moment of ‘creative disruption’ for Indian economy?

By: Suman Rai

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