How open banking contributes to the rise of e-commerce

While the pandemic has greatly accelerated the development of online sales, open banking has revolutionized payments and provides innovative solutions to e-merchants.

The pandemic has undoubtedly accelerated the development of e-commerce: among those under 35, a third of spending is now done online according to the BPCE Digital & Payments Barometer. The French spent 129 billion euros online in 2021, an increase of 15.1% from 8.5% in 2020.

Double-digit growth, which is particularly explained by the profound change in consumer habits associated with successive closures. With the closure of so-called unimportant companies, the French shifted some of their purchases to the Internet, effectively supporting the omnichannel. Taking advantage of favorable regulatory development and the appetite of investors for non-listed, many services have emerged, especially financial ones, that support the development of online commerce.

Open banking has revolutionized online payment

The European Services and Payments Directive (PSD2), which entered into force in 2018, established open banking. Open banking is a technology that allows banks to securely share their data with other players in the financial ecosystem, such as fintechs. Prior to the mass introduction of open banking, the payment universe has historically been dominated by traditional players, such as banks.

By affirming better cooperation between banks and fintech, open banking has promoted the marketing of innovative services for the benefit of consumers, such as e-merchants. This has especially led to the development of new payment solutions, a basic lever in converting visitors into customers. With the development of online sales, issues related to simplifying the payment phase and securing transactions have become crucial for merchants.

Simplify payments and limit fraud

Although the bank card remains the main method of payment online, consumers are increasingly turning to 100% digital solutions, as evidenced by the success of fintech companies Revolut and Lydia, and solutions offered by GAFAs such as Apple, Pay or Google Pay. By integrating easily into the consumer buying path, Buy Now Pay Later (BNPL) has also contributed to the revival of e-commerce. BNPL accounted for 4% of online sales in 2020, an increase of 20% over the previous year. An opportunity for e-merchants to retain their customers and attract younger ones: today, two-thirds of those under the age of 35 use this payment solution.

In 2020, payment fraud generated a loss of more than 6% of turnover for 38% of e-merchants. It is on the rise at more than one in two retailers. If it is impossible to eliminate it completely, the emergence of open banking has also marked the development of tools to limit hacking, such as providing a link between banking institutions and new financial services.

Optimize cash flow management

Open banking has also contributed to the emergence of fast-track financing solutions tailored to the economic model of online platforms. Credit scoring in particular made it possible to solve the problem of late payment by direct analysis of consumer solvency. This also applies to bank transfer payment solutions, which also allow solving the problem of the ceiling. An effective way to avoid declining payments and that ensures a shopping experience, on both sides. It should represent 15% of online payments by 2025.

Open banking simplifies and makes cash flow management cheaper, which is the lifeblood of the war for traders facing seasonal activities and dependent on periods of peak spending. The method of financing that is already well known across the Atlantic, Revenue Based-Financing (RBF), has recently appeared in Europe. It allows e-merchants to receive financing in the form of a cash advance, in less than 48 hours, and adjusts to seasonality by offering them compensation based on their monthly turnover. A small revolution for e-merchants, who can finance their growth almost instantly.

All of these innovations undoubtedly played a role in the growth that the e-commerce sector experienced in 2021. In total, more than a quarter of fundraising there was done by French start-ups in the consumer, payment and data sectors, and e-commerce is expected to continue to grow. According to the Alliance of Professionals in the Sector (Fevad), this could show an annual growth of 20% in 2030.

While constraint has certainly played a role, the rise of e-commerce in recent years has been more structural than cyclical, and open banking has played a leading role. Enabling platforms to better understand consumer expectations and providing them with the means to meet them, but also giving them the means to fund their growth. E-commerce has all the keys to rediscovering yourself!

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