Future of Ecommerce 2020

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F U T U R E O F E C O M M E R C E 12 Momentum builds for 'buy now, pay later' sector Shopping habits of the new homebound consumer have pushed the "buy now, pay later" sector to new heights, playing to dual mindsets of cash consciousness and online security Ordo now has its sights set on the high street, rolling out its platform to point of sale later this year to help local businesses like hairdressers and florists reduce "till time" and better navigate the post-coronavi- rus minefield. Its branching out is reflective of the wider buy now, pay later spread, in response to shifts in the retail landscape impact on all consumer verticals. "This sector knows no bounds. You have the likes of Laybuy that entered the weave purchase game. Before you know it, you'll be able to buy now, pay later your rent or Deliveroo order," predicts Sharon Kimathi, editor of FinTech Futures. Klarna is steamrolling ahead with its mission to dominate, bolstered by the addition of a loyalty pro - gramme and savings account, part- ners in niche areas like music and soon luxury fashion. "From our own research, 46 per cent of consumers say they would be more likely to buy luxury items if retailers gave them the option to pay in instalments," says Luke Griffiths, Klarna UK general manager. For Clearpay, it's ticketing and travel that have become part of the empire. "We've seen positive adop - tion from customers in those catego- ries, so we'll look to implement them in other markets," says Molnar. But a strong footprint doesn't mean everything is up for grabs. Travel, for example, is ripe for the growth of an industry specialist despite the current decline, argues Jasper Dykes, founder and chief executive of Fly Now Pay Later. The startup recently secured £35 million in funding on the promise of post- COVID-19 demand punctuated by a rise in holiday costs. It's a sector where mainstream buy now, pay later providers have not been as effective because of a "cookie-cut - ter approach" to underwriting, Dykes explains. "They're used to underwrit- ing small transaction values of say £60 to £150, whereas we specialise in underwriting transactions of £1,000 to £3,000," he says. "Travel brands have become frustrated by the low acceptance rates other providers can offer them; we've certainly taken a few high-profile merchants away from Klarna. But it is a battle as they have a strong brand." Building a long-term strategy around becoming travel experts is Fly Now Pay Later's secret weapon, both against the global juggernauts and as a future acquisition target. Consolidation is certainly already playing out in this highly competi - tive space, with Zip recently acquir- ing QuadPay for £215 million and Klarna acquiring Moneymour for an undisclosed amount. It's also a contentious space where, despite payment guidelines, increasingly vulnerable consumers may not always realise the commit- ment and how defaulting can tar- nish their credit rating. Kimathi at FinTech Futures warns of "a perfect storm brewing for a credit collapse", yet Dykes, Griffiths and Molnar assert that their frame- works are transparent, empowering and responsible. As the consumer data pinpoints, perhaps it is the credit card indus- try that will be the ultimate victim. "Consumers are seeking alternatives to the traditional credit card when they need financial flexibility and are no longer willing to accept a sys- tem that doesn't meet their needs," Klarna's Griffiths concludes. uy now, pay later brands such as Klarna, Clearpay and Zip have redefined fast credit, becoming favourable house- hold names and the ally of consum- ers and retailers alike. Worldpay's 2020 Global Payments Report reveals this market is grow- ing 39 per cent year on year in the UK, with top players poised to dou- ble their market share by 2023. The UK ecommerce market is predicted to flourish a further 37 per cent to £319.8 billion in the next three years, with buy now, pay later pro- viders set to earn around 3 per cent of its global spend. Not only are shoppers and vendors flocking to get on board, but so are investors. Klarna went into lockdown having secured a stake from Alipay operator Ant Financial Group and has pushed ahead with its Australian expansion following a £54.3-million investment from the Commonwealth Bank. Meanwhile, Australian outfit Openpay recently secured £25 mil - lion to fuel its UK expansion. The drivers are consistent: con- sumers turning away from tradi- tional credit cards and seeking greater ownership over their money and spending habits. Nick Molnar, co-founder of Clearpay, known as Afterpay in other markets, notes that more than 85 per cent of the platform's global orders are made with debit cards. "Those impacted economically by COVID-19 are showing clear risk B MaryLou Costa aversion to traditional credit and large purchase commitments such as houses or cars, however stimulus continues to support discretionary spending at lower price levels. We offer a safe alternative that allows people to budget and use their own money responsibly," he says. Consumer desire for greater flex - ibility and control is also linked to the rise in freelance and con- tract work which is more frequently becoming a stop-gap for businesses with hiring freezes. The trend has paved the way for the likes of Nationwide-backed startup Ordo, which describes itself as a "request for payment service", that allows businesses to send a secure invoice to a payer and receive payment in real time. Like a buy now, pay later platform, Ordo offers delayed payments and instalments, but also allows users to pay bills and manage their wider finances. "More people are in the gig econ - omy and especially now they might have irregular income, which might not necessarily be low. So the usual monthly direct debit no longer suits a lot of people, which is why a lot of buy now, pay later services have become popular because the monthly payment model doesn't reflect how people are being paid themselves," says Ordo co-founder and director Fliss Berridge. "Another layer is people want peace of mind that their payments are going to the right person. This is a backlash against authorised push payment fraud, which in 2018 amounted to over £200 million and most of that not recovered. You end up with two innocent victims, the consumer and the business that hasn't been paid." P A Y M E N T S BNPL LE ADERS Share of ecommerce payments made up of 'buy now, pay later' services by selected country in 2019 Worldpay 2020 39% annual growth of the UK 'buy now, pay later' (BNPL) market 3% McKinsey 2020 of global ecommerce sales will comprise of BNPL spend by 2023 UK 3% Australia 8% France 2% Germany 18% Japan 2% Norway 13% Sweden 25% United States 1%

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