We all know the cost of a failed payment in terms of loss of service, late payment fees, reinstatement charges, and so on.
In this post, I’m going to estimate the cost of escaping a failed payment.
I had to pay college fees of INR 300,000 (~US$ 4615). The college supported an array of digital and paper-based payment options viz.
- Digital: Log in to college website, use college’s ePayment Gateway and pay by Credit Card.
- Paper: Demand Draft.
I evaluated the pros and cons of both options.
DIGITAL PAYMENT
- Credit card reward points: 3000 (@ 1 point per INR 100 spend). Generally, reward points can be redeemed for gifts worth INR 0.25 per reward point
- Deferred payment of 45 days, so no need to break FD immediately
- Automatic linkage of remittance info to student’s account
- Convenience of making the payment from home
Cons:
- Risk of failed payment due to two factor authentication and patchy Internet connection, as highlighted here.
PAPER-BASED PAYMENT
- Zero risk of payment failure
Cons:
- Visit bank to buy the Demand Draft (3 hours)
- Demand Draft commission (INR 1000)
- Loss of interest because I need to break FD immediately
- Visit college to submit the Demand Draft (1/2 hour)
- Manual updation of payment on college website (1/2 hour)
Now, let me compute the “dollar value” of the difference between these two options:
BASIS: INR 300,000 Payment |
INR |
||
|
|
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Gift value of 3000 reward points @ INR 0.25 per point |
: |
+750 |
|
Interest on INR 3.00 Lakhs FD for 45 days @ 8.50% p.a. |
: |
-3188 |
|
Demand Draft commission |
: |
-1000 |
|
|
: |
|
|
The Paper option had an incremental cost of INR 4938 (being INR 750 + INR 4188) ~ INR 5000 (US$ 80).
I still opted for it.
Which suggests that’s the monetary value I attached to escaping a failed payment and the subsequent trouble of getting my money back.
Day5 after @TheOfficialSBI lost a high value RTGS amount of mine and they still cannot find out where it is….Is there any responsible official in this bank who want to avoid a legal case @guptapk
Complete apathy with no sense of customer service— Salil Ravindran (@salilrav) June 8, 2019
In short, the price I was willing to pay for peace of mind was INR 5000 / US$ 80.