From ‘Caveat Emptor’ to buyer protection: Why safeguarding buyer interest should be the #1 priority in digital transactions


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Caveat Emptor referred to as ‘let the buyer beware’ is a critical concept in the Contract Law that places the onus of conducting due diligence upon the buyer. This is often believed to be the fundamental principle governing all commercial transactions between buyers and sellers.

Salient features of the rule:

The rationale behind the rule is the presence of an information asymmetry between the buyer and the seller. It is but obvious that the seller would have higher information about the product rather than the buyer. Accordingly, in the absence of a warranty, the risk of a defective product falls upon the buyer. The buyer, on his/her part, needs to do thorough due diligence prior to the purchase and ensure that the product meets his/her specifications. The underlying assumption is that the seller makes an honest representation of the facts to the buyer. The Caveat Emptor rule impacts consumer purchase decisions even in the digital formats.

How is this relevant to digital transactions?

With the digital-first economy and proliferation of e-commerce transactions, business enterprises are gradually migrating to online platforms with digital payment modes. This has resulted in the emergence of digital marketing of products to buyers by way of online advertisements, discounts, and special offers for loyal customers.  However, in many instances, the quality of the products or after sales-services would fall short of customer expectations. Often, due to a few bad purchase experiences, a trust deficit is created. As a result, the buyer opts for a Cash on delivery (COD) model under which the buyer convinces herself/himself of the product specifications and quality and then finalizes the transaction and makes the payment.

RBI’s annual report for 2019-20 reveals the heightened demand for currency, aggravated by the pandemic crisis, along with a simultaneous jump in digital payments.

 

Currency and Digital Payments move in sync
Currency and Digital Payments move in sync Source: Hindu Business Line 

Key findings of RBI’s annual report reveal the parallel jump in preference to hold cash: 

(i) The currency to bank deposit ratio jumped from a decade’s average of 15.1% to 16.3%

(ii) COVID-19 aggravated a ‘rush to cash’ with currency to GDP ratio increasing to 12% in 2019-20 compared to 11.3% in 2018-19

Clearly, despite the emergence of multiple digital payment modes, there is immense potential waiting to be tapped by way of convincing buyers to transition from cash to digital payments. A recent Standard Chartered study reveals that 87 percent of Indian citizens and 64 percent globally expect their country to adopt full cashless transactions by 2025.

Besides the convenience factor, the perception amongst buyers related to digital modes needs to change. This is possible only by building long-term, sustainable trusted relationships with the buyers.

Factors that impact buyer trust

Why do people abandon shopping carts?
Why do people abandon shopping carts?

Lack of buyer trust can result in reduced spending, cart abandonment and reduced repeat purchases. A recent survey by SaleCycle Abandonment Surveys indicates interesting global buyer trends:

31% of BNPL customers, globally opined that they would have deferred the purchase without the ability to pay later. Another survey revealed that 48% of buyers believed that their purchase decisions would be influenced by the availability of BNPL facility. Clearly, the trends reveal that buyers prefer multiple products, multiple payment modes and multiple shopping formats. More choice for the buyer indirectly reduces the risk assumed by the buyer, protects consumer interests and ultimately wins buyers’ trust.

Winning buyer trust through technology innovation

Simpl replicates the buyer protection factor derived from COD and incorporates the convenience of digital payments at the same time – a best of both worlds’ scenario.

The hallmark of Simpl’s model is building trust. Simpl’s Buy Now Pay Later model attempts to help buyers transcend this trust divide by enabling successful transactions followed by payment at a subsequent point of time. This way the trust of the consumer is won by enabling the buyer to acquire the product now and pay cumulative bills from multiple orders of multiple merchants at one go during the end of the billing cycle. Merchants get an opportunity to reward their best customers for their loyalty by extending interest-free credit under the BNPL option.

A frictionless, smooth checkout experience with instant POS credit goes a long way in winning buyer loyalty and trust. Simpl’s payment option enables buyers to avoid repeated payments by providing a single consolidated bill.

Making a case for a buyer-first approach

Another aspect of prioritizing buyer interest is the need to eliminate the risk of payment failures. Often buyers are directed to a third-party payment gateway with poor UI interface and the money is debited but the transaction reflects as failed. This erodes the trust of buyers in the merchant. Simpl eradicates these challenges by integrating the 1-click payment option within the merchant website itself.

Legal viewpoint of buyer protection

Caveat Emptor continues to have serious legal ramifications on contractual relations between buyers and merchants. India’s Consumer Protection Act 2019 has included within its ambit digital transactions conducted on online marketplaces and e-commerce platforms with the goal of ensuring adequate buyer protection.

 

Salient features of the law:

Salient Features of the Law
Salient Features of the Law

 

Concluding thoughts:

While the buyers need to continue to be vigilant, legal considerations apart, it would be prudent of payment providers, merchants, e-commerce players and the other participants in the fintech ecosystem to prioritize buyer rights and protect consumer interests. Simpl drives transparent transactions with buyers, without any hidden charges or ambiguous conditions. Further, the protection of buyer money is at the core of our product offering.

Winning buyer trust would lend the necessary depth and volume to the digital transactions’ universe, emphasize quality in the delivery channels as well as product offerings and contribute to driving economic value for all stakeholders.

 

Simpl is at the forefront of the fintech revolution in India. Through our innovative BNPL offerings and affordable pricing, we aim to catalyze and simplify the payments domain for end-customers and merchants alike.

To know more about our products, please visit: https://getsimpl.com/


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