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Quantifying The Risk Of Online Payment Failure

I had to pay college fees of INR 300,000 (~US$ 4615). The college supported an array of digital and paper-based payment options viz.

Digital: Log in to college website, use college’s ePayment Gateway and pay by Credit Card.

Paper: Demand Draft.

I evaluated the pros and cons of both options.

DIGITAL PAYMENT

Pros:

  1. Credit card reward points: 3000 (@ 1 point per INR 100 spend). Generally, reward points can be redeemed for gifts worth INR 0.25 per reward point
  2. Deferred payment of 45 days, so no need to break FD immediately
  3. Automatic linkage of remittance info to student’s account
  4. Convenience of making the payment from home

Cons:

  1. Risk of failed payment due to two factor authentication and patchy Internet connection. I’ve written about this here.

PAPER-BASED PAYMENT

Pros:

  1. Zero risk of payment failure

Cons:

  1. Visit bank to buy the Demand Draft (3 hours)
  2. Demand Draft commission (INR 1000)
  3. Loss of interest due to need to break FD immediately
  4. Visit college to submit the Demand Draft (1/2 hour)
  5. Manual updation of payment on college website (1/2 hour)

*****

The monetary difference between the two options is computed in the table at the end of this post (Sorry I couldn't draw a table in the body of the post, hence I've used a graphic as the workaround). 

The incremental cost of the Paper option is INR 4938 (being INR 750 + INR 4188).

I still opted for it.

Why?

Because of the risk of failure of online payment. And the consequent trouble I'd have to go through to get my money back, which I've written about here. This is worth nearly INR 5000 (~US$ 77) in my mind (excluding cost of extra time taken up by the paper option).

This is the perceived cost of the risk of online payment failure.

a member-uploaded image
4848

Comments: (6)

Shaju Nair
Shaju Nair - Temenos - Bangalore 09 April, 2017, 15:57Be the first to give this comment the thumbs up 0 likes

Interesting to see the quantification.

But this is relevant only in case of a 'patchy internet connection' right ? Why would 2FA fail ? I have faced issues of OTP delayed or not received, in which case you simply retry. But there hasn't been case of failures.

Ketharaman Swaminathan
Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune 09 April, 2017, 19:01Be the first to give this comment the thumbs up 0 likes

No, it's relevant for many more reasons. You can find them by following the hyperlink given in my post. 

Shaju Nair
Shaju Nair - Temenos - Bangalore 16 April, 2017, 13:46Be the first to give this comment the thumbs up 0 likes

@Ketharaman, yes read it and appreciate your point. I googled up to find that the success rate of online payment is as low a 18%.

Thank You,

Ketharaman Swaminathan
Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune 17 April, 2017, 14:55Be the first to give this comment the thumbs up 0 likes

@ShajuNair: 18% success rate? Gasp! That's scary!!

Chetan Ghadge
Chetan Ghadge - Wipro - Pune 18 April, 2017, 15:28Be the first to give this comment the thumbs up 0 likes

@Ketharaman  with HDFC i am assured that i will never make a double payment even in case of connectivity failure. Just sharing my experience.

With HDFC you get an SMS the moment your transaction is authorised. So if you have a patchy internet connection but if you get an SMS that means the transaction has gone through. The webpage on your machine will just time out but you will be assured that the payment is done.

There is however a possibility that there is a connection issue between merchant gateway and HDFC so the merchant doesn't get the authorosation response and he displays payment failure meesage to you . In this case depending upon the amount and your risk appetite you can do the payment again . HDFC will again authorise this transaction and you will get SMS confirmation , but when it comes to settlement only the second transaction is settled while the first transaction gets cancelled.

I have experienced this quite a few times and i am comfortable relying on this system when it comes to my regular merchants like amazon, tata docomo , makemytrip etc. 

 

Ketharaman Swaminathan
Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune 18 April, 2017, 19:08Be the first to give this comment the thumbs up 0 likes

@ChetanGhadge:

You hit the nail on the head when you say it all depends "upon the amount and your risk appetite". The amount is INR 300K and this post is about putting a monetary value to risk appetite.

I certainly don't have the risk appetite to attempt an INR 300K payment again in the hope that my bank - even assuming it's HDFC Bank - will cancel the first transaction when the second one comes for settlement. More so because there have been times when I've got the merchant acknowledgment's of successful payment but I haven't got the transaction confirmation SMS from the issuer bank - especially if it's HDFC Bank.