Paytm & US presidential $1 coin act

US treasury under its presidential $1 coin act – 2005 allowed individuals to buy $1 coins through credit cards. The scheme a federal government measure to increase circulation of small coins with current president’s pictures throughout the nation, but was misused and used to rotate credit card debt. Since there was no postage or handling charge, people raked up huge credit card rewards points through this scheme. This person earned 4 million reward points. Many individuals deposited sealed bags that US treasury had shipped in the banks without even bothering to open them up.

Those who don’t read history are doomed to repeat it. In November 2016, Paytm allowed people to charge their credit card and immediately withdraw the money to their bank accounts. So, if my credit card spend today (first day of billing) will not be due next 45 days (30 day credit free period & 15 days of payment period). Furthermore, I could use the withdrawal to pay off my previous month’s credit card debt allowing me to rotate the debt. In the process the user can rake up a huge rewards (like the $1 coin act) points effectively creating wealth for nothing.

Coupons and promotional schemes often have unintended consequences and it is the job of the strategy & product planning team to borrow a leaf from Nash’s game theory. Rather than blaming the customers and singling out employees of nationalized banks the company should refine its own business model. Chalk out a revenue plan to pay for the services it provides. Almost everybody with a credit card also has a debit card with him or her. If you give someone multiple options, they will use what is most rewarding for them (in terms of convenience, economics, liquidity etc.) Most ecommerce websites allow for multiple payment options, but they always ensure that refunds are processed back to the original payment mode. If you roll out a system which is so flawed that it literally begs everyone to manipulate it, then one should not cry when taken advantage off.

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