Friday 26 September 2014

Selling to Yourself: Financing Your Business with E-Commerce

Times of India reports that with a heady growth in online transactions in the country, unscrupulous e-commerce merchants are setting up shops to try and gain from the system by buying from their own portals and thus swiping card for instant cash to finance their offline businesses. "We have suffered Rs 4.5 lakh of fraud out of which one e-commerce merchant sold a used 'car' worth Rs 1 lakh to himself by his credit card," said Nitin Gupta, CEO of PayU India, one of India's leading payment gateways, which has over 30,000 e-commerce merchants registered with it. Cash withdrawal at an ATM in India through a credit card is charged at about 2.7%-2.8% monthly, which on an annualized compounded basis comes to about 40%. But a swipe at your own e-store will land you 'instant' cash at just 1%, the rate now being charged by most mobile wallets and payment gateways for e-commerce transactions. It's this loophole, that small time traders have found to be a cash rotating machine by opening fake online retail companies. "In the particular case, the transaction went through but was caught as the buyer and seller account details were the same. No real sale happened," said Gupta.

Financing your business through e-commerce: Sell to yourself? E-commerce is throwing up new dilemmas.

SJP @DigitalAsian

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