While the pandemic has greatly accelerated the development of online sales, open banking has revolutionized payment and provided innovative solutions to e-commerce.
The pandemic has undoubtedly accelerated the development of e-commerce: among those under the age of 35, a third of consumption is now made online according to the BPCE digital scale and payments. In 2021, the French spent 129 billion euros online, an increase of 15.1% over the year, compared to 8.5% in 2020.
Double-digit growth is explained in particular by the profound change in consumption habits associated with successive restrictions. With the closure of the so-called nonessential companies, the French have shifted part of their purchases online, effectively supporting the one-stop channel. Taking advantage of favorable regulatory developments and investor appetite on the unlisted, many services, particularly financial ones, have emerged to support the development of online commerce.
Open Banking has revolutionized online payment
The European Services and Payments Directive (PSD2), which came into force in 2018, created 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. Before the massive spread of open banking, the world of payments was historically dominated by traditional players, such as banks.
By certifying better collaboration between banks and fintech companies, Open Banking has boosted the commercialization 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 buyers. With the development of online sales, issues related to simplifying the payment stage and securing transactions have become crucial for merchants.
Simplify payment and reduce fraud
While bank card remains the primary online payment method, consumers are increasingly turning to 100% digital solutions, as evidenced by the success of fintechs Revolut and Lydia, and solutions offered by GAFA such as Apple. Pay or Google Pay. By simply integrating into the consumer buying journey, Buy Now Pay Later (BNPL) has also contributed to the revival of e-commerce. BNPL accounted for 4% of online sales volume in 2020, up 20% from the previous year. An opportunity for e-merchants to retain their customers, while also attracting young people: Today two-thirds of those under 35 use this payment solution.
In 2020, payment fraud resulted in a loss of more than 6% in sales volume of 38% of e-merchants. It is on the rise with more than one in two merchants. If it is impossible to eliminate it completely, the emergence of open banking has also led to the development of tools to reduce piracy, such as securing the connection between banking institutions and new financial services.
Improve cash flow management
Open banking has also contributed to the emergence of fast financing solutions that adapt the economic model of online platforms. The credit rating system has made it possible in particular to address the problem of default through direct analysis of the solvency of consumers. This is also the case for payment solutions by bank transfer, which also make it possible to counteract the problem of ceilings. Effective way to avoid payment rejection and secure both sides shopping experience. It should account for 15% of online payments by 2025.
Open banking simplifies and makes cash flow management less expensive and is a war nerve for merchants facing seasonal activity and dependent periods of peak consumption. An already well-known method of financing across the Atlantic, revenue-based financing (RBF) has recently emerged in Europe. It allows e-merchants to obtain 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-commerce merchants, who can thus fund their growth almost immediately.
All these innovations undoubtedly played their part in the boom in the e-commerce sector in 2021. Altogether, more than a quarter of fundraising there was carried out by French start-ups in the consumer, payment and data sectors, and e-commerce is expected to continue to rise. According to the Federation of Industry Professionals (Fevad), it could show 20% annual growth in 2030.
While containment certainly has played its part, the rise of e-commerce in recent years is more structural than cyclical, and open banking has played a leading role. By allowing platforms to better understand consumer expectations and by providing them with the means to meet them, but also by giving them the means to fund their growth. E-commerce has all the keys to reinventing itself!