Contrast in the Payment Systems of India and West
-Avinash Yadav
(School of Management, IIT Bombay - 2016 batch)

There are many differences in the "business and management" models of India and west. It can be noticed in the form of the payment systems also. Though the main motive of the payment systems is to collect the revenue, the execution part of both differs a lot. In west, the culture of "upfront" payments is much more prevalent. It can be noticed even in the B2C businesses especially in the western food chains like McDonalds, KFC, Burger King etc. They have continued their payment culture even in India. One of the immediate side effects of the same system that comes to mind is its effect on customer loyalty and relationship. I am of the view that by paying upfront, the customer can never feel associated with the food outlet.

In contrast to this, the payment system of India in food outlets is post-consumption. "Chai-shops" (tea-shops) across India and the "Pret-A-Manger" of United Kingdom, both the shops are in the economically affordable segment. But payment systems are drastically different. In India, the consumer makes the payment for tea after consuming it; while in Pret-A-Manger, one has to pay upfront to get the coffee. As a result, people in United Kingdom prefer to walk away from the stores after collecting their coffee. This may have a lot to do with the work culture but certainly weakens the customer relationship with the shop/outlet. On the other side, at chai-shops, people prefer to take a tea, consume it and then pay for it. This strengthens the relationship in between the tea vendor and his customers as considerable time is spent at the tea outlet by the consumers while having their tea which gives a chance to the tea vendor to have conversations and the same leads to repeat purchase from the same customer. Another advantage of this system is that in the Indian system of payment, the customer feels much more on priority rather than the western systems. The customer has the privilege to complain and not paying if the product is not good rather than getting stuck in the hectic refund procedures in case of dissatisfaction as that of the western models. Post-consumption payment procedures also put a pressure on the vendors to maintain the highest possible standards of quality to ensure the payment from the customers.

Let's move to next level of shopping.

Indian FMCG system is largely based on the local baniya shops (Local grocery shops) rather than the organized retails like as that of western stores like Tesco, Walmart etc. Here also there is a difference in the payment system. The local baniya (shopkeeper) generally provides the credit period to his customers and maintains a record (bahi-khata) of the purchases made by them. The consumer pays collectively for a month when he has sufficient funds available. This increases the customer retention considerably as the customers feel themselves associated with a particular shop which offers them a privilege.

Robin Sharma in his book "The Greatness Guide", mentions that people are moved when their emotions are moved. One can see it happening in case of, post consumption payment systems. Post payment system offers a chance to the shopkeeper to have the conversations with his customers, thus binding him closely and developing an emotional connect with the customers which increases the customer loyalty and retention up to a great extent. The customer also feels a social bound to pay the grocer for his purchases because of this emotional connect, thus securing the grocer from the risk of defaults. On the other hand, in the organized retail, the customers have to pay upfront for the purchases which doesn't involve any relationship orientation and forces the companies to adopt other methods like offering large sales discount to attract the customerswhich costs them on their margins.

Undoubtedly Indian payment system and Indian business & management systems have evolved over thousands of years and are far more robust.

Avinash Yadav can be reached at

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