Hey everyone, today we’re going to talk about an interesting topic which you should know if you do shopping online. In this article, we’ll cover how the banks earn by providing us with discounts and cashback. So without any further due, let’s get started!
Whenever we open the page of any product listed on an e-commerce website, there are many discounts. To give an example, Discounts such as 10% cashback/instant-on SBI credit card up to 1500-2000 and maybe more.
Do you know: the banks earn their major part of the revenue from giving loans with high interest. While the same banks pay very little interest to their customer for their deposited money. This difference makes a major part of revenue for banks.
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Attracting users towards Online Payment
The e-commerce sites avoid the COD (Cash on Delivery) payment method as much as they can. This is because the transaction charges paid online were very less compared to COD. Because, when we pay the amount to the delivery person, they deposit it to HUB. And lastly, transfer it to the e-commerce site. In order to maintain this, they have to pay a huge amount of money.
Another point is the mindset of the customer. When someone orders anything online while paying COD, then there are chances that the customer can cancel the order without thinking much. As if the customer finds a better deal somewhere else. But in the case of online payment, there’s a question mark in the customer’s mind about the refund. The question mark is they don’t know when they will get the refund of the canceled product. Although they will definitely get the amount back.
If the customer cancels the order in COD, then the e-commerce site will have to pay the shipping charges. Also, the shipping charges will double in this case.
That’s why they try as much as they can to divert the customer’s mind towards online payment. This is possible for them by giving exciting and attractive offers with online payments.
What’s their benefit in giving discounts with online payment?
Basically, the banks want you to spend as much as you can with their card. This is because more and more transactions mean more and more processing fees for them.
The shopping site highlights a bank’s card a lot. This is because doing this creates hype for that particular bank’s card. This makes many customers attracted towards getting a card from that bank for them. Because of this, there’s a huge increase in the customer base of that bank.
The third point is that whenever we purchase anything online for example for Rs 20000. Then most often banks start to call us to convince the customer for making EMI for that purchase. When these banks do these on a very large scale, there are some buyers who will opt for this. Now the banks will charge an amount for converting it to EMI and the interest charged here is much higher.
How can the banks earn while giving cashback?
The banks can afford the Cashbacks over instant discounts. This is because in the case of instant discounts the transaction amount will be less. The less amount will result in less transaction fee. In the case of cashback, the refund takes 90-120days. In this period the bank will use the amount for loans which will give profit to the banks.
At most, the private banks are involved in all these discounts and cashback. Private banks such as HDFC, ICICI, BOB, etc. But there’s a Government bank that has started to follow the same practice, SBI. In most sales, the SBI ties with either Amazon or Flipkart.
With this practice, credit card users will attract to this bank for extra savings. Also, the savings account users will go towards the Debit Card of these banks. In both cases, the bank is generating new customers. The common thing in both CC and DC users of the bank is in the future both the users will be potential loan buyers for them. And as mentioned earlier the banks will earn a lot with these loans. But the same is not applicable in the case of net banking.
Why no discounts in Net banking?
The first reason is cards are very easy to use against net banking. No hassle of entering user id/ password, etc. The second reason is when we use our card on a shopping site, the site saves the card. This verifies the number of times a user can use that card for discounts
Earlier it was very common that on changing different accounts with using the same card will give more discount. But now we can use a card only once for a discount. Even if we switch to another account and use the same card. But in the case of net banking, the e-commerce site doesn’t have any information about the card. Also, the bank stores the card details on their site. So, the users can misuse the offer.
Ultimately, the bank’s goal is to generate more and more users to earn revenue. As if a user gets late to pay the CC bill, then they can charge a fine for it. And, also banks have multiple ways to earn from us.
That’s it guys for today’s blog. If you found this blog informative, then you can share it with your friends and family. Do check out our website and YouTube channel for more stuff related to this. We’ll meet in the next blog. Until then,
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