EID is almost around the corner of the Moon, Indian E-Commerce companies have come out with amazing cashback offers which will make you ‘CLICK, CLICK AND CLICK’ and will give you a reason to smile once again.
On this holy day of EID, Flipkart is offering 10% Cashback on every transaction which you make through your CITI Bank Credit and Debit Cards. Have a look.
Not only Flipkart but their competitor Amazon is also offering a 10% cashback on 7th & 8th July using Standard Chartered Credit/Debit Card
And if you are planning to go out somewhere with your family Make My Trip is always there for you with their yet another amazing cashback scheme offering you a mega 30% Cashback ! ! Have a look
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Now, the “Curiosity_Wala_Keeda” has once again risen inside me. So the question I ask is ‘How do these Banks manage to give cashbacks offers on online shopping.’
Now you might ask for a direct discount instead for a 10% cashback, because technically they are almost the same.
See we need to understand how these banks actually make money in the modern era of cashbacks and discounts other than the traditional way of earning by generating revenue from the difference between high interest rates on loans with respect to low interest rates on saving accounts.
Let me explain you in a very simple manner.
THEY KEEP YOUR MONEY
THEY INVEST YOUR MONEY
THEY EARN INTEREST ON YOUR MONEY
THEY KEEP THE INTEREST
THEY RETURN YOUR MONEY BACK AFTER SOME TIME ! !
Just 5 Phrases that accounts for a big bushiness model that indeed changed the entire way of shopping.
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Now in actual practice cashbacks are less costly to banks than direct discounts.
If a bank tries to offer you a direct discount, then they will have to pay the offered discount to the retailer at the time when you will make the purchase. Hence a less transaction amount
By offering cashback, they will also keep your money (Which is cashback and not discount) with them for a specific period of time and will promise to credit the cashback amount to your bank account after that period. And all that while, they will invest that money to generate some revenue.
Now just admit it that you don’t really care about after how much of time they will give you those cashback because psychologically your mind is just diverted on your brand new Iphone 6S that you bought rather than considering the fact that they are giving you those cashbacks after a specific period of time which is normally 60-90 days.
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Now another reason why banks offer cashbacks is because they want their customers to purchase products through their own debit and credit cards on E-Commerce websites so that they can charge transaction fees which is roughly around 2.87-3.96% or even more depending upon a lot of factors.
Don’t worry, they don’t charge you for those transaction fees. E-Commerce websites pay for that.
Also we shouldn’t miss the fact that after offering such cashback offers, banks do get new customer base who can be potential loan seekers in future.
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Well I hope that I was able to explain the subject in a much easier way. If you are a specialist regarding this Banking Industry and knows how things really work, please feel comfortable to write your views about this subject and help our viewers to know more ! !