E-commerce in post-Covid economy: what has changed?
Fintech startups played a significant role in the global financial industry during the pandemic. Payments companies especially, have brought rapid solutions to aid the transition in commerce, which shifted from physical to digital in a matter of months. Many brick-and-mortar businesses began to offer online services, which led to a significant 26% jump in global e-commerce activity last year. That said, the question whether the need for e-commerce-boosting fintech solutions will remain after the pandemic still lingers.
Payments industry experts expect the increase of fintech solutions to continue driving the growth of e-commerce for the foreseeable future, citing the change in user behaviour. To further this, Frank Breuss, CEO and co-founder of Nikulipe—a fintech company creating and connecting Local Payment Methods (LPMs) in the Fast-Growing and Emerging markets—has noted that some challenges, which have undermined e-commerce before, remain unsolved and so the need for fintech solutions will remain for the foreseeable future.
Breuss explained that the pandemic highlighted one of the main challenges that e-commerce faced for years prior to 2020—the willpower to move towards digital payments. The pandemic restrictions, in turn, have forced many companies to accelerate the implementation of digital payments and virtual customer support in their businesses.
“Prior to Covid-19, many retail companies around the world had been mulling over digital service offerings. However, a relatively small segment of early adopters treated it as an urgent need. The pandemic effectively drove many companies that previously relied on brick-and-mortar stores to explore digital channels to ensure business continuity and survival.”
E-commerce platforms like Shopify, WooCommerce and others allowed even small businesses to make a quick digital switch without going through huge infrastructural investments. They offer easy creation of an e-shop, as well as access to payment gateways and plugins, which enabled business owners to manage essential customer relationship management (CRM) tasks like making appointments, creating a contact list and managing orders in real time.
During this time, fintechs working in the payments industry have also introduced various services and solutions to ease the financial burden on consumers during the difficult economic situation. As an example the ‘Buy Now Pay Later’ (BNPL) option, which allows shoppers to pay in installments, was made available to many more customers in recent years. Mobile payments have also shown a dramatic growth, becoming a lifeline for the Emerging markets as mobile phones are more widely accessible than bank accounts. Experts regard this as a giant step towards achieving financial inclusion globally.
According to Breuss, low financial inclusion has been and continues to be a significant impediment to the growth of e-commerce, especially in Emerging markets. As a result, over 2 billion people worldwide are unable to participate directly in global online trading. In Africa, where about 60% of the population remain unbanked, Fintech companies have come to the rescue. Many African countries recorded huge fintech investments last year, peaking at $1.35bn by Q4 2020. This is expected to see Africa’s contribution to global trade rise significantly over the next few years.
“At Nikulipe, we are working on meeting consumers’ needs to be able to pay with the Local Payment Method of their choice—not just at their local but also at global merchants. This became even more relevant since the Covid-19 crisis,” explained Breuss. “During the last one and a half years, fintechs working in the payments industry came up with a number of solutions to ease e-commerce tool adoption and they still have a significant role to play in the growth of e-commerce and global trends over the next decade,” he added.
As the world begins to make a gradual return to normalcy, e-commerce will have to continue solving the challenges it faces. While the move to digital payments has seen significant progress, a majority of LPMs still exclude global merchants, limiting consumer choice. Financial inclusion has moved forward as well with BNPL and mobile payments gaining popularity, but suitable LPM solutions and internet accessibility remains restrictive to the wider inclusion. Region-specific regulations remain another hurdle to figure out, and these ongoing challenges could be solved only with continued fintech involvement.
