Forty million.
That was the number of new users from Southeast Asia who came onto the internet in 2020. With lockdowns from the pandemic catalysing the ‘flight to digital’ and forcing consumers to shop online, the e-commerce industry has witnessed unprecedented growth.
Within the region, the industry experienced a compounded annual growth rate (CAGR) of 63 per cent from 2019 to 2020.
And this growth is sticky. According to Google’s e-Conomy SEA 2020 report, nine in 10 users intend to continue using digital services going forward. Consequently, e-commerce within Southeast Asia is projected to grow 23 per cent CAGR to hit US$172 billion by 2025.
Amidst these eye-boggling statistics, it also means the e-commerce industry would get more competitive as more players enter seeking to get a slice of a growing lucrative market.
Retailers will need to fight harder for loyalty by establishing competitive advantages in user experience. Put simply, the best experience wins.
Besides, the increased adoption of digital services will see e-commerce platforms emphasise fighting online fraud. In 2019, US$260 million was lost to digital fraud in the region, with identity theft (71 per cent) and account fraud (63 per cent) among the leading methods.
This figure, which puts Southeast Asia among the top regions for fraud worldwide, has been largely caused by inefficiencies in identity verification.
Also Read: Locad lands US$4.9M seed funding to provide logistics infra for e-commerce businesses
Therefore, how can e-commerce platforms stand out from the competition while fighting fraud?
The growth of e-commerce is expected to continue post-pandemic. (Image Credit: e-Conomy SEA report)
All hail open banking
Leveraging on open APIs, open banking enables e-commerce platforms to securely connect to a consumer’s bank account for purposes including initiating payments or retrieving data on their behalf.
This enables e-commerce companies to build a better user experience by allowing shoppers to pay directly from within the app.
Besides bypassing traditional card interchanges and eliminating platform fees, a frictionless payment process would also decrease drop-offs, resulting in a higher conversion rate.
Open banking APIs also enable e-commerce platforms to offer alternative payment options such as buy now, pay later (BNPL). With open APIs facilitating an accelerated credit scoring process, platforms can provide risk-adjusted financing plans to increase checkout rates, without running the risk of high default rates.
With Open banking, merchants can also look forward to a more convenient onboarding process. By allowing the e-commerce platform to access their bank account data, verification of account ownership and other know-your-business (KYB) processes can be accelerated, allowing for trusted sellers to start quickly.
Crucially, open banking reduces the possibility for fraud to occur. As transactions payments are processed by the consumer’s bank, they are subjected to bank-grade security guidelines, thereby significantly reducing identity theft and account fraud.
Also Read: Why banks will benefit from open API
From the e-commerce consumer’s perspective
Firstly, the user would have the option to select their preferred payment method. If they had selected a direct bank payment, they would be automatically directed to their banking app, where the authentication and authorisation processes would take place.
Once verification and consent are given, payment is sent directly from the user’s bank account to the e-commerce platform. During this, the user is redirected back to the platform to continue the checkout process, preventing drop-offs.
Led by API platforms such as Finantier, Open Banking is changing the future of how consumers use financial services by enabling various sectors, including e-commerce, to create seamless customer experiences.
It is allowing a new generation of e-commerce platforms to emerge – one that prioritises the needs of both retailers and consumers.
This post was originally published on Finantier’s blog.
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