Here's How Fintech Adoption Is Driving The E-Commerce Growth Story In India

¡®Fintech¡¯ is a phrase increasingly read throughout 2017 in the media. So what is fintech? In layman term, ¡®fintech¡¯ refers to any technology that enables faster or better experience in payments, credit assessment or disbursement, or reconciliation.

Financial technology or Fintech has radically revolutionized the way we pay for our goods & services and has introduced a wave of new payments methods.

The payments landscape strengthened by fintech has evolved over the last few years to extend its wings to several markets, including the stock market, the insurance industry, the e-commerce market and the lending market, among others.

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E-commerce players have benefitted the most with this revolution in fintech industry, as it has evolved the ecosystem including consumers¡¯ need. The fast-growing e-commerce market, which is predicted to mature by 28 per cent per year from 2016 to 2020 (According to a report by global payments firm Worldpay), India is set to become the second largest in the world in less than two decades.

E-commerce industry, to stay ahead of the curve, has realized the efficacy of bringing in innovative offerings to provide that premium and seamless checkout experience to its consumer while shopping online. This is where fintech comes into play, payment companies have paved the way for many e-commerce giants and newcomers to efficiently widen their reach and provide new age consumers what they need.

The following trends in the e-commerce space will define their growth path in the coming years and fintech industry will act as a catalyst:

? Increasing the online basket size

For e-commerce companies to become competitive and profitable, basket size per user needs to increase while cutting down on the customer acquisition cost. For this to unfold, fintech will play an important role. With deferred payment options and micro credit facilities being offered by many fintech players in the market the dependency on cash on delivery (CoD) has reduced by 35-40%.

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These credit facilities and other payment options while shopping online will further enable ecommerce to grow. For example, with buy now pay later options like LazyPay, consumers are opting for these offerings which has further reduced CoD and increased the demand for small ticket credit.

? Improving the online approval rate

In 2015, $4.4 bn revenue lost in 2015 due to 20 - 30% of transaction failure at the payment page. Hence, there is a need for products/services which are faster and can give a higher conversion while doing online transactions.

Fintech players have been able to provide consumers with such a premium experience which includes hassle-free quick and easy shopping, no issue of phishing for passwords and without charging any interest on deferral payments. The collaboration of the e-commerce players with fintech industry has reduced the payment drop-out rate by 10%.

One example of such product is auto OTP read and submit that helps significantly improve success rate by reducing OTP entry errors by users.

? Seamless checkout experience

The new generation consumers prefer the fastest mean for anything and everything. Putting address details, one time passwords, credit/debit card details is soon going to be a thing of past. Making things happen with a click of a button is the new trend. Fintech innovations are constantly working to make this possible.

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The emerging trend will be that regular shopper will not need to constantly put in their address details and with just one click their order will be placed. For example the ¡®pay later¡¯ function where the consumer is allowed to allowed to stack all the purchases and pay later without use of OTPs, CVV etc. which in turn speeds up the checkout process and results in better success rate and user experience.

? Credits to drive e-commerce market

In many parts of the world, access to credit has always been a challenge for a large number of people. In India 8% of the transactions get dropped because of insufficient funds. Lack of credit including low/no access to credit cards has been a bottleneck for e-commerce merchants.

Point of sale credit can drive the online users to e-commerce platforms. Availing credit /EMI payment options at the checkout interface and getting quick credit approvals will help consumers to complete their purchase process without worrying about the cash crunch or insufficient amount on their credit/debit cards.

This credit is usually in the form of installments or a buy now, pay later solution offered by fintech players in the market. Credit solutions can help increase conversion rates as well as basket size for merchants, and allow consumers to increase their usage of online shopping.

Most of the smartphones & consumer durables are bought in India using the EMI payment option. This trend is expected to further increase with the rise of no cost EMI options and easier credit availability at PoS.

? Cross-border payments

There has been a rapid rise in the online marketplaces and in today¡¯s borderless world, talented professionals and small businesses are looking at payment solutions that remove the hurdles associated with sending and receiving international business payments.

There is an increasing need for the complainant and low-risk solutions that enable businesses to expand into new markets and scale their business. The Reserve Bank of India (RBI) has opened new avenues of business for digital payment players.

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Total online cross-border spending in India grew by more than 78% from 2015, according to BCG. India has shown robust growth in both the export of goods and services in the recent past. The country has a large population and a budding market of entrepreneurs.

With the advent of new payment solutions like digital wallets and UPI (Unified Payments Interface), the online payment users have grown over the years. Most of the e-commerce players grew because of the success of the Cash on Delivery (COD) model, which was rather prevalent in India, due to a large amount of cash being circulated in the economy. It is only in recent times, due to the demonetization drive, Indians have jumped on to the electronic payments bandwagon.

Fintech has revolutionized the way we do business and, given the advances in other segments of the technology and financial sectors, this paradigm shift is changing the entire corporate sector, with some companies now already re-evaluating their business models to embrace the change. Today, businesses can be operated entirely online and for e-commerce to take a leap fintech will be the trampoline!

About the author: Shailaz Nag is the Co-Founder and COO of PayU India