Shortly after opening its first company-owned stores in India in April last year, Apple encountered an unexpected challenge: many customers preferred to pay in cash. This trend led the tech giant to install currency note counting machines in both its Mumbai and Delhi outlets. Despite the widespread adoption of digital payments, a significant 7-9% of Apple’s sales at these stores are made in cash, in stark contrast to less than 1% in its stores in the US or Europe, according to insiders.
Regional Differences in Cash Payments
The preference for cash transactions is more pronounced in the Delhi store compared to the Mumbai store. Both stores report directly to Apple’s retail team in the US, with their sales included in Apple’s global accounts. The popularity of cash payments at Apple stores has even led to numerous queries on Quora from consumers curious about paying in cash.
India’s Cash Economy
Apple’s experience is not unique in India, where cash transactions remain significant despite government efforts to promote digital payments and limit cash transactions to ₹2 lakh per person per day since 2017. Cash in circulation more than doubled to ₹35.15 lakh crore in March 2023 from ₹13.35 lakh crore in March 2017, even as digital payments through the Unified Payments Interface (UPI) surged to ₹19.64 lakh crore in April 2023 from ₹2,425 crore in March 2017, according to the National Payments Corporation of India.
Cash Payments in the Automobile Industry
Similar trends are observed in the automobile industry, where cash payments are prevalent. The Federation of Automobile Dealers Associations (FADA) estimates that 15-20% of cars sold in India are self-funded. For luxury vehicles, a fifth of sales involve direct cash payments, with buyers typically paying ₹2 lakh upfront and the balance through other means such as cheques or electronic transfers.
High Cash Usage for Luxury Cars
Mercedes-Benz India reports an even higher proportion of cash and self-funded purchases, with 25% in Mumbai and Bengaluru and 15% in other markets. “Almost 20% of customers opt for an all-cash purchase,” said Santosh Iyer, managing director of Mercedes-Benz India. A car dealer in Delhi, speaking anonymously, shared his frustration when a buyer wanted to purchase a super luxury car entirely in cash.
Reasons Behind the Preference for Cash
Manish Raj Singhania, president of FADA, explained that many customers prefer to pay in cash to avoid financing options and interest payments. Some customers also lack the necessary documents to secure a bank loan or are not deemed credit-worthy. This trend is observed not only in rural areas but also in urban markets, where customers often combine cash payments up to ₹2 lakh with cheques and RTGS (real-time gross settlement) transfers.
The Complex Financial Landscape
Despite the government’s push for digital payments, the continued preference for cash in high-value transactions like electronics and automobiles highlights the complex financial behaviors in India. This preference underscores the need for businesses to adapt to these unique market conditions and for continued efforts to bridge the gap between cash and digital payment adoption.
