eCommerce became a possibility back in 1991 when the internet started gaining traction. The future of eCommerce breathed life with the arrival of Amazon in 1994, and it continues to be the world leader among all eCommerce businesses running, in today’s date.
It might be a surprising fact for many, but the fintech seed started germinating back in the 1950s. It has been growing its roots deeper and branching out further over the last six decades, through continuous evolution and innovation. Companies dabbling in fintech were open to finding out what the market wanted at each stage and responded by creating tools and technologies to support the same. This constant exercise has made fintech what it is today.
Both eCommerce and fintech faced friction from their more traditional brethren, namely the brick and mortar stores and traditional banks, respectively. The latter saw the possibilities the combination of tech, commerce, and finance could bring together and stood firmly against the very idea of these concepts.
Over time, all four of them started co-existing in the market by creating a symbiotic relationship. The traditional counterparts have now realized that it is easier to accept and integrate technology into their daily operations to increase both the bottom line and client base. Banks are increasingly using tools and software powered by fintech to streamline their underwriting, and loan origination processes, among others, while brick and mortar stores have started introducing online stores, as well, thereby reaching out to more customers than would have been possible otherwise, given their fixed store location.
However, this is not the most impactful equation we are talking about here. The impact that really matters here is the one fintech has had on eCommerce in building its ecosystem, which would otherwise have been very limited.
eCommerce can only be successful when buyers and sellers are working in parity. There should be both demand and supply. However, while there might be many budding entrepreneurs and sellers who would like to sell their products in the market, they seldom find the right financial assistance required to set up a business, buy inventory etc.
Traditional banks are not very forthcoming when it comes to providing loans to startups and small and medium businesses. But fintech lending companies have changed that. They not only provide loans to small businesses but also customize the loans based on their needs and make the overall process of loan origination a much quicker one, as compared to traditional banks. This has given many small businesses the ability to grow faster and expand further.
The same applies to the customer side of the story. Without fintech, a large portion of the unbanked population of the world would not have access to eCommerce and its benefits. Fintech companies introduced innovative tools and payment platforms which helped the unbanked population make online transactions and enjoy the fruits of eCommerce. The hassles of opening and maintaining a bank account was soon replaced by quick mobile payments and digital wallets. This led to a steady increase in financial inclusion, brought sellers and consumers together and built a strong foundation for the global eCommerce platform.
Consumers were not comfortable with transacting online, earlier. They did not understand how money could be safely transferred online, as they could not see it changing hands, something that they felt comfortable with.
Digital payment platforms, in due time, helped build trust among consumers by providing them easy payment interfaces. This helped more people adopt online payment platforms such as PayPal and start transacting online. Not only does fintech help boost trust in online payments but the convenience of being able to sit at home and conduct transactions was an idea that soon became popular with consumers. No longer did they need to stand in queues at shopping counters and banks, as fintech companies and their tools made banking and purchase transactions easier.
Fintech has turned the global eCommerce marketplace into a thriving one. Geographical boundaries no longer act as barriers for consumers buying from different countries. Logistics had stopped being a problem for a long time now, but online payments across geographies continued to be a complicated issue. Payment platforms and digital wallets such as Amazon Pay, Google Pay, and WhatsApp Pay have revolutionized payment processes thereby allowing people to purchase goods and services from around the world, from the comfort of their home. These platforms have made services like refunds and advance payments easier, thereby boosting the trust of both consumers and vendors.
As more fintech players are entering the market and competing with international and domestic players, consumers stand to gain from this stiff competition. Various companies venturing into the business of payment platforms are offering consumers attractive deals and discounts by collaborating with popular brands. Right from offering cashback to flat discounts on purchases and free movie tickets, digital payment platforms are constantly trying to win market share by having consumers levitate towards them through these offers. This, in turn, has increased the amount consumers are spending online, boosting online sales even further, thereby boosting eCommerce as a whole.
Fintech lending companies are now providing zero percent interest on online loans right at checkout to help consumers buy big tickets items at a go. This has helped consumers make purchases they would otherwise have planned and saved for a long time. By giving people the freedom to make purchases without worrying about the cost and ways to fund their purchases, fintech lending companies have not only boosted eCommerce but in its own way has also introduced financial discipline into the lives of consumers.
Last but not the least, one of the biggest impacts of fintech on eCommerce is its ability to collect information of numerous consumers through various apps and services. They then run this data through analytics and AI algorithms to identify buying patterns of consumers thereby directing targeted ads towards them, based on their previous purchase patterns. This again has increased sales as consumers are more likely to buy something that they have already viewed online and shown interest in by, say, adding an item to a ‘Wishlist’. Fintech companies are now selling these data-rich reports and analytics to third parties who can benefit from these consumer insights and provide better and more targeted products and services.
As we can see, fintech companies have been adding quite a lot of value to the eCommerce scenario. As the industry continues to evolve and innovate it will surely impact the eCommerce industry at a much larger scale, in the near future.