Quantifying The Risk Of Online Payment Failure

I had to pay college fees of INR 300,000. 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.



  1. 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
  2. Deferred payment of 45 days, so no need to break FD immediately
  3. Automatic linkage of remittance info to student’s account
  4. Convenience of making the payment from home


  1. Risk of failed payment due to two factor authentication and patchy Internet connection. I’ve written about this here.



  1. Zero risk of payment failure


  1. Visit bank to buy the Demand Draft (3 hours)
  2. Demand Draft commission (INR 1000)
  3. Loss of interest due to need to break FD immediately
  4. Visit college to submit the Demand Draft (1/2 hour)
  5. Manual updation of payment on college website (1/2 hour)


Let me compute the cost difference of the two options below:

BASIS: INR 300,000 Payment




Gift value of 3000 reward points @ INR 0.25 per point



Interest on INR 3.00 Lakhs FD for 45 days @ 8.50% p.a.



Demand Draft commission







The incremental cost of the Paper option is INR 4938 (being INR 750 + INR 4188).

I still opted for it.


Because of the risk of failure of online payment. And the consequent trouble I’d have to go through to get my money back. I’ve written about this here. This is worth nearly INR 5000 in my mind (excluding cost of extra time taken up by the  paper option).

This is the perceived cost of the risk of online payment failure.

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