Although the pandemic has further accelerated the generation of online sales, open banking has revolutionized payment and provided innovative solutions to e-merchants.
The pandemic has undeniably accelerated the growth of e-commerce: among those under 35, a third of consumption is now done online according to the BPCE Digital & Payments Barometer. In 2021, the French will spend 129 billion euros online, an increase of 15.1% over the year, compared to 8.5% in 2020.
A double-digit growth specifically explained by a profound change in consumption habits associated with successive incarcerations. With the closure of so-called non-essential businesses, the French shifted part of their purchases online, effectively endorsing omnichannel. Taking advantage of favorable regulatory developments and investors ’appetite for the unlisted, many services, especially financial ones, have emerged to support the development of online commerce.
Open banking has changed online payment
The European Services and Payments Directive (PSD2), which began in 2018, established open banking. Open banking is a technology that allows banks to share their data securely with other players in the financial ecosystem, such as fintechs. Prior to the widespread deployment of open banking, the payment universe was formerly dominated by traditional players, such as banks.
By fostering better cooperation between banks and fintech, open banking has promoted the marketing of innovative services for the benefit of consumers, such as e-merchants. In particular, this has led to the development of new payment solutions, a key lever in converting visitors into customers. With the development of online sales, issues related to streamlining the payment stage and securing transactions have become important for merchants.
Streamlining payment and limiting fraud
While the bank card remains an important form of online payment, consumers are increasingly switching to 100% digital solutions, as evidenced by the success of fintech Revolut and Lydia, and the solutions offered by GAFAs such as Apple . Pay or Google Pay. By integrating a simple way into the consumer buying journey, Buy Now Pay Later (BNPL) has also contributed to the resurgence of e-commerce. BNPL reached 4% of the value of online sales in 2020, up 20% from the previous year. An opportunity for e-merchants to retain their customers, while also engaging younger ones: now two-thirds of those under the age of 35 use this payment solution.
By 2020, payment fraud generated more than 6% turnover loss for 38% of e-merchants. This rises to more than one in two traders. If it is impossible to completely eliminate it, the advent of open banking has also marked the development of tools to limit hacking, such as securing connections between banking establishments and new financial services.
Optimize cash flow management
Open banking has also contributed to the emergence of rapid financing solutions adapted to the economic model of online platforms. Credit scoring has specifically made it possible to address the problem of payment defaults by directly assessing the solvency of consumers. This is also the case for payment solutions by bank transfer, which makes it possible to combat the problem of ceilings. An effective way to avoid payment declines and that ensures the shopping experience, on both sides. This should represent 15% of online payments by 2025.
Open banking simplifies and makes cash flow management cheaper, the roots of the war for traders who face seasonal activity and rely on periods of peak consumption. One form of financing already known across the Atlantic, Revenue Based-Financing (RBF) has emerged recently in Europe. It allows e-merchants to obtain financing in the form of a cash advance, in less than 48 hours, and adapts to seasonality by offering them reimbursement based on their monthly turnover. A small revolution for e-merchants, who can finance their growth almost immediately.
All these innovations will undoubtedly play their part in the growth experienced by the e-commerce sector in 2021. In total, more than a quarter of fundraising there was conducted by French consumer start-ups. , payments and data sectors, and E-commerce is expected to continue to increase. According to the Federation of professionals in the sector (Fevad), it could show annual growth of 20% by 2030.
While containment has certainly played its part, the rise of e-commerce in recent years has been more structural than cyclical, and open banking is playing a leading role. By enabling platforms to better understand consumer expectations and by giving them ways to meet them, but also by giving them ways to finance their growth. E-commerce has all the keys to reinventing itself!