Skip to Main Content
HBS Home
  • About
  • Academic Programs
  • Alumni
  • Faculty & Research
  • Baker Library
  • Giving
  • Harvard Business Review
  • Initiatives
  • News
  • Recruit
  • Map / Directions
Faculty & Research
  • Faculty
  • Research
  • Featured Topics
  • Academic Units
  • …→
  • Harvard Business School→
  • Faculty & Research→
Publications
Publications
  • 2019
  • Working Paper
  • HBS Working Paper Series

The Effect of Payment Choices on Online Retail: Evidence from the 2016 Indian Demonetization

By: Chaithanya Bandi, Antonio Moreno, Donald Ngwe and Zhiji Xu
  • Format:Print
  • | Language:English
  • | Pages:31
ShareBar

Abstract

The Indian banknote demonetization in 2016 was one of the most significant international events of that year. Overnight, 86% of Indian currency in circulation was declared invalid unless exchanged for new bills. The sudden and unexpected demonetization constituted a large shock to the entire Indian economy. One effect of the ensuing cash shortage was a large and sustained increase in the adoption and usage of digital payments. We use detailed sales data consisting of more than two and a half million transactions from a leading Indian online retailer to empirically investigate the effects of payment digitization on the online retail industry. We take advantage of the demonetization as a source of exogenous variation that induced a subset of consumers to switch to digital payments from more commonly used cash-on-delivery payments. We show that consumers who switch to digital payments maintain their purchase frequency but spend more and are less likely to return their purchases. Our findings show that firms in emerging markets may enjoy gains from consumer demand in addition to operational gains resulting from payment digitization.

Keywords

Cash On Delivery; Online Retail; Product Returns; Payment Methods; Digitization; Emerging Markets; Currency; Internet and the Web; Demand and Consumers; Retail Industry; India

Citation

Bandi, Chaithanya, Antonio Moreno, Donald Ngwe, and Zhiji Xu. "The Effect of Payment Choices on Online Retail: Evidence from the 2016 Indian Demonetization." Harvard Business School Working Paper, No. 19-123, June 2019.
  • Read Now

About The Author

Antonio Moreno

Technology and Operations Management
→More Publications

More from the Authors

    • 2023
    • Faculty Research

    Operational Consequences of Customer Interaction Design: Evidence From Last-Mile Delivery Services

    By: Natalie Epstein, Santiago Gallino and Antonio Moreno
    • May–June 2023
    • Operations Research

    Need for Speed: The Impact of In-Process Delays on Customer Behavior in Online Retail

    By: Santiago Gallino, Nil Karacaoglu and Antonio Moreno
    • March 2023 (Revised August 2023)
    • Faculty Research

    Majid Al Futaim: Adapting the Shopping Mall to the Digital Era

    By: Antonio Moreno and Gamze Yucaoglu
More from the Authors
  • Operational Consequences of Customer Interaction Design: Evidence From Last-Mile Delivery Services By: Natalie Epstein, Santiago Gallino and Antonio Moreno
  • Need for Speed: The Impact of In-Process Delays on Customer Behavior in Online Retail By: Santiago Gallino, Nil Karacaoglu and Antonio Moreno
  • Majid Al Futaim: Adapting the Shopping Mall to the Digital Era By: Antonio Moreno and Gamze Yucaoglu
ǁ
Campus Map
Harvard Business School
Soldiers Field
Boston, MA 02163
→Map & Directions
→More Contact Information
  • Make a Gift
  • Site Map
  • Jobs
  • Harvard University
  • Trademarks
  • Policies
  • Accessibility
  • Digital Accessibility
Copyright © President & Fellows of Harvard College