Don’t make dumb decisions with your smartphone4 min read . Updated: 09 Nov 2015, 12:18 AM IST
Indians had culturally been good savers and been ring fenced from the mortgage crisis and excessive credit card debts of the West; but that is changing
It was in the year 2000 that a leading daily newspaper changed its editorial policy of not having headlines on the first page: a dotcom company took over the front and back pages and the insides too, to announce its launch. Now, 15 years later, we are accustomed to turning at least two pages before getting to the news.
Why has this happened? One of the reasons for this has been the increase in disposable income. Earnings have gone up substantially and with that, the ability to spend. This was bound to happen—the “demographic dividend", which for many years was a bane, is now seen as a boon, and maybe even a boom. Possibly, the break-up of the joint family system has exacerbated this. The elders, whose sagacious advice to focus on the “safety net" was respected, may not be staying with the spenders.
Indians had culturally been good savers and been ring fenced from the mortgage crisis and excessive credit card debts of the West; but that is changing.
The number of young adults under the age of 30 who are coming to us with questions like “How do I clear this credit card loan?", “How do I improve my credit score if I have defaulted before?", are only increasing and is a cause for concern.
The nuclear family also means that the young head of the family is managing money for the first time. There are no rules to be followed; and good advice is not easy to find. Borrowing, which was considered taboo, is now encouraged. Coupled with increased earnings in the last decade, was the easy access to credit in between falling interest rates and tax breaks starting with housing loans. This percolated quickly to other loans and it almost seems like you may have missed the bus if you have no reason to borrow.
And now the digital world has arrived, almost like a tsunami and you are encouraged to take spending decisions in an instant—and another one in the next instant. You can easily take some dumb decisions with your smartphone and once you have clicked the button (or three online), it is difficult to take corrective action even if you regretted it.
Online shopping has rapidly expanded to cover a smorgasbord of categories we could not have imagined even a couple of years ago. While the intent to move society to cashless is honourable as the aim is to ensure no leakages, it also does away with the pain of parting with money. Plastic and the mobile phone are all you need to convert a want to a need—and with it, the joy of saving for a future pleasure is gone in a jiffy.
With a lot of the action happening in the online space, offline stores just cannot afford to be left behind—peer pressure extends beyond individuals to businesses too—and some of the reasons, to be fair, are pure economics. Earlier, I could easily walk into a men’s fashion store and purchase one white shirt that I needed. Now, I am tempted with a package of three shirts, only one of which is white, with an offer of “buy three, get one free". And at the billing counter I might be tempted to add a bunch of socks, handkerchieves or a wallet. All this ensures that festival shopping can be done any time of the year and seasonal sales seem to happen way too often. There are airlines that have offers being thrown every other weekend—and I wonder if they are missing a business opportunity of getting a royalty from the holiday resort their flyers have impulsively decided to travel to.
To get consumers used to buying online, the free return policy was thrown in as a carrot—anecdotally, I understand that the returns have now reduced. Moreover, the reluctance to dispose off items that were not fitting or useful, has given way to replacements rather than repairs. Decisions to buy and hence spend money can be made with lesser qualms of guilt. Buying for others or gifting is so much easier with offers available all year round and also the multiple or bulk purchase incentives mentioned earlier. Payments banks and online wallets drive this habit easily, ignoring the potholes ahead.
In a consumer driven society, is there place for the good old habit of budgeting and spending lesser than what you saved and even lesser than what you earned this month? Can we avoid the temptation of the words “free", “sale", “offer" and find the pleasures of delaying and earning for one’s wants? In some ways, I do hope that we do not change our spending habits when investment products are put alongside fashion and electronic appliances online. The time to test this thesis is possibly just a few months away.
Lovaii Navlakhi, founder and chief executive officer, International Money Matters Pvt. Ltd.