Today, the retail industry is the largest among all the industries in India, accounting for over 10 percent of the country’s GDP and around 8 percent of the employment. India’s retail sector has come forth as one of the most dynamic and fast-paced industries and is gradually inching its way towards becoming the next boom industry. The total concept and idea of shopping has undergone an attention drawing change in terms of format and consumer buying behaviour, ushering in a revolution in shopping in India. Modern retailing has entered into the country’s retail market as is observed in the form of bustling shopping centres, multi-storied malls and the huge complexes that offer shopping, entertainment and food all under one roof. A large young working population with median age of 24 years, nuclear families in urban areas, along with increasing working women population and emerging opportunities in the service sectors are going to be the key factors in the growth of the modern retail in India, which clearly indicates rise in “power to purchase.”
Gone are the days when the term EMI (equated monthly installment) was associated with home loans or car loans. With banks offering credit cards to its customers with attractive schemes and the standard of living of the middle class going up, people are now opting for EMI for luxury – something that never existed before. Payment for purchases through easy payment options such as EMI is becoming a common facility used by more and more consumers to fulfi ll their immediate purchase requirements through easy access to credit. And unlike the earlier days, EMI is no more a cumbersome process that needs signifi cant paper work. It is now just a call away. Recently credit card issuers have enabled a hassle-free facility that allows consumers to opt for an EMI mode of payment while carrying out the purchase at the merchant, i.e., prior to swiping of the credit card.
This does not require any additional paperwork and since the process is enabled in such a way that it takes place prior to purchase, it helps trigger sales. Such EMI options are commonly referred to as “merchant credit card EMI” options.
What is merchant credit card emi?
While most of the audience or end customers are aware of the EMI option, one might wonder what “merchant credit card EMI” is. Merchant credit card EMI is an interesting payment innovation that can trigger sales and improve usage of credit cards benefi ting all stakeholders. Typical categories in which merchant credit card EMI can be benefi cial are as follows:
• Consumer durables and IT products – basically utility items costing much more than monthly savings. • High-quality daily use apparel – items people would like to buy for their quality but cannot afford paying for in one instance
• Vacations – travel and stay plans for family
• Home improvement and furnishings
• Aspirational categories of products EMI options help spreading the payment for the consumer; so these options are typically provided by the merchant on the MRP of the product and may even include a small processing fee/charge. Hence, these help the merchant drive sales while protecting margins.
Market research in India indicates that after introduction of merchant credit card EMI in 2010, sales of products on EMI has grown by over 100 percent on a year-on-year basis in certain categories such as apparels. In consumer durable retail formats, it has helped increase store sales by over 15-20 percent on a yearon- year basis.
Merchant credit card EMI schemes require a special kind of POS software to be deployed at the merchant location. The card issuer authorises the overall purchase amount against the outstanding credit limit on the card and then authorises the EMI based on the terms agreed upon with the merchant. Once authorised, the consumer signs a charge-slip authorising the entire credit limit and another charge slip approving the conversion to EMI. The EMI slip would also contain the consumer’s approval of processing charges or interests that the consumer would need to bear
Market research in india indicates that after introduction of merchant credit card emi in 2010, sales of products on emi has grown by over 100 percent on a year-on-year basis in certain categories such as apparels.
In the current scenario with constant challenges posed by competitors, any type of service provider that does business in multiple locations can benefi t from EMI in mobile and CDIT as well. With more and more people becoming smartphone savvy, this is a facility that enables customers to buy mobiles, durables and IT products today and pay for it in installments on their credit card. A nominal processing fee is applied by the bank to customers for availing this facility, which can also be absorbed by merchants to promote specifi c product category. This will enable quick and easy options to get set up and start with accepting payments.
Today, paper money has beenreplaced by plastic with more and more people opting for credit or debit cards. If retailers cannot accept credit cards while on the go, they could be losing out big time in sales and profi t. But by giving their customers a wider option of payment through credit cards and topping it up with the EMI option, retailers will more than likely increase their customer base and ultimately increase sales