More than half the train tickets in India are purchased in cash. But this could tilt towards the digitised format if train booking agents were incentivised to book digitally, says a RailYatri survey.

"The sale of reserved train tickets through authorised agents (contributing an estimated half of the reserved ticket sales) continues to be in cash," according to a survey by RailYatri, a web-based firm that provides various rail and bus-based solutions.

The primary cause for this is the disincentive in the ecosystem, which rewards cash while penalising online transactions. This finding is based on a countrywide survey of consumers and ticketing agents.

Agents prefer cash as there is an upper limit on the payment gateway charge they can charge for tickets priced up to Rs 2,000, which is lower than the average bank charges. This makes accepting electronic payments costlier for agents.

The finding calls for correction to enhance digital payments -- so emphatically stressed by the Prime Minister of India.

Dependence on agents

The neighbourhood ticketing agent still continues to be the preferred choice for Indians looking to buy their train tickets. An estimated 65,000 of these small businesses are spread across the nooks and corners of the country, representing the true grit of Indian entrepreneurs, battling all odds to keep themselves afloat. Their differentiators are door-step service, local knowledge and customer relationships. Train ticket purchase involves a number of decisions, and travellers prefer to go through their trusted agents to do the job.

“A significant consumer section of India depends on managed services, especially when the complexity of their need is high. And, because of the supply-demand mismatch & other uncertainties around train travel, ticket booking falls in this bucket. This has, in turn, led to the popularity of train ticket booking through these mom-and-pop travel agents." says Manish Rathi, co-founder & CEO, RailYatri.

Based on a recent survey done by RailYatri, it was found that while the larger agents have mechanisms for accepting digital payments, their train ticket booking is nearly entirely in cash.

While consumers have increasingly shown an inclination towards digital payments, travel agents still shun this mode. Much of it, according to them, is due to the outdated ticketing rules and penalty imposed on them.

Cap on payment gateway charges

The study found that the unrealistic rule of imposing a cap on Payment Gateway (PG) charges at 0.7 per cent (for train tickets priced less than Rs 2,000) is completely out of tune with the average bank charges, which the agents have to pay.

According to RailYatri, the typical PG charges varies between 1.5 to 2 per cent depending on the provider, with most providers falling on the higher side. Agents, understandably, are unwilling to pay for the difference of over 0.7 per cent to the payment banks from their own pocket. Any instance of charging above 0.7 per cent, even if the money is finally kept by the bank, exposes the agent to steep fines and penalties. Hence, their preference for cash.

Second, cash transactions leave no trail. These agents have seen the cost of train tickets increasing more than 80 per cent in the last five years and so have the cost of running their business.

However, their commission on train tickets has been capped at Rs 20/40 with no increase in the last many years. This has forced several agents to continue with cash payments as it allows them to charge without a trail of actual amount paid. The consumer, unfortunately, is the biggest loser in this.

“Nearly a crore train tickets are booked in cash every month and this doesn't opine well with the well-intended and ambitious plan of the Government to move the nation towards digitisation and online payments - especially when this is in their own backyard. However, the good news is that this can be quickly fixed by revisiting the rules. These agents are an integral part of the small businesses ecosystem and the system needs to incentivise them to accept and look for customers who are willing to pay digitally, thus, fulfilling the Digital India dream," says Rathi, co-founder & CEO of RailYatri.

Noida-based RailYatri.in was set up by Manish Rathi in 2011 with a mission to simplify train travel. Rathi has a Computer Science degree from Western Michigan Univ, US. Kapil Raizada, an alumni of IIT Kanpur and IIM Bangalore and Sachin Saxena, an alumni of IIT Kharagpur and Stanford are its co-founders.

mamuni.das@thehindu.co.in