Howfintechsareshapingfinancialservices(Part2)

13 April 2023

This article first appeared in The Business Weekly & Review on 31 March 2023

Fintech: How they are shaping financial services (Part 2)

By Kefilwe Mokgosi and Neo Kootsholetse

Like the financial services sector, there has been a rise in the influence fintechs plays across different sectors. According to an article by 365Retail UK, the global fintech industry is valued at $310 billion and expected to grow to $600 billion by 2025. The retail sector has witnessed extensive benefits from fintechs, including organisational cost containment, operational efficiencies, diversity and growing distribution channels. This has catalysed global growth in the sector. As part two of this article series, we will examine the impact of fintech’s on the retail sector and see how local retailers can benefit from this growing trend.

The link between fintech and retail

Fintech retail is an emerging trend in the financial sector. More and more, retailers are using innovative, digitally based strategies to offer customers more personalised, convenient, and cost-effective services. The link between fintech and retail continues to be refined, and has recently included the rise of ecommerce, electronic payment solutions, the use of live customer communications, the advancement of the ‘buy now, pay later’ services as well as the use of data and Artificial Intelligence (AI) to shape the marketing and selection of consumers by retailers.

The growth of digital payment solutions 

A key fintech trend having an impact on retail is the growth and impact of online payment methods such as Apple Pay, Google Wallet and Amazon Pay, following behind PayPal. According to Globe News Wire (https://www.skyquestt.com/sample-request/digital-payment-market), annual global digital Payments were expected to reach $8.5 trillion in 2022 and are expected to grow to $15.17 trillion by 2027. This growth is driven mostly by convenience and the security of these platforms. The number of users on these platforms makes them an attractive partner for retailers. For example, according to a Retail Insider article, Apple Pay customers can access the service in over one million locations in the world making it attractive for most international retailers. Since its inception Google Wallet has reached over 10 million transactions per day on average in 2022, a two million increase from the previous year.

Ecommerce dominates the global market

According to a report by Morgan Stanley, the ecommerce market is currently valued at $3.3 trillion and is projected to grow to $5.4 trillion in 2026. This growth is driven by several factors such ease of accessibility through mobile phones, marketplace expansion and logistics. According to the international Trade Administration, Africa has seen ecommerce users increase from 139 million in 2017 to 388 million in 2022, with this number expected to grow by a further 34% to over half a billion by 2025. This poses a significant opportunity for African retailers to access the vast market across the continent.

The opportunity in Buy Now, Pay Later (BNPL)

Another growing retail trend is the Buy now, Pay later (BNPL) offering. The BNPL is essentially unsecured credit that has increasingly become a popular Fintech enabled payment method, mostly offered on ecommerce platforms. BNPL as a solution can be traced back to installment payment plans but in truth it is a form of point of sale financing, meaning that credit is originated at the point of sale and payment made at a later stage. The key differences of this offering to mainstream credit funding is that it allows the client to get credit at the point of purchase with or without requiring a deposit, interest free and without any credit history for approval, allowing the consumer to focus on their shopping. With such an offering, retailers tend to see a lot more online purchases.

Key benefits of fintechs for the retail sector

The rise of the fintech retail has been driven predominantly by the benefits derived from the technology. Robust data access and analytics provide the retail sector with information they never had before on consumer buying patterns. This enables them to predict with more certainty the types of products suitable for different consumer segments. Comprehensive data also results in:

1. Consumer convenience: Connected to the plethora of online retail options is the rise of convenience. Retail giants such as Amazon and Alibaba have been able to create a more diverse marketplace for consumers, giving them access to vast product range from across different brands. This has given the consumer more power to select their desired items, in their preferred sizes, styles and colour, with immediate confirmation of availability of the garments. The rise of BNPL has added another level of convenience to this by allowing consumers to enjoy the instant gratification of owning their desired products and pay at a later stage. All this done from the comfort of their chosen location. This is often preferable to the inconvenience of going to physical malls.
2. Access to a larger customer base and diverse customer base: With more global consumers having access to some form of online shopping and/or electronic payment solution, this has created a large opportunity for retailers to access new, diverse consumer segments. This is enabled by the advancement of fintech retail, coupled with improved global logistics. Another benefit is that retailers can track of changing consumer patterns and behaviours, enabling them to adjust marketing and trading strategies to meet changing consumer needs.
3. Quick customer feedback and enhance services: The integration of AI in the retail industry is an emerging trend that is set to grow. Currently the AI integration is still at its infancy in the retail sector with only a few major retailers leveraging the technology. Retailers have begun turning to AI-powered chatbots to provide personalized customer services. They have also begun automating routine tasks and responses, using this technology to analyse customer data and further predict their requirements. This is beneficial for both customers and retailers because it saves time for both parties while also providing a better customer experience.
4. Market intelligence: Online transactions require consumers to input key information about themselves or create a profile indicating their preferred products. Information such as gender, age, physical location and search history provide valuable insight on customer segmentation. The use of cloud computing has also further enabled saving and tracking of all individual online transactions. Retailers use this information to establish consumer trends, allowing them to offer products suitable for individuals. Such market intelligence is also useful when choosing appropriate marketing techniques and channels for specific consumer segments. This has simplified the process of targeting consumers and further enabled possibilities for new and informed growth strategies.

Fintech retail in Botswana and How FNBB is playing a role

Online retail is still in its infancy in Botswana and the acceptance of ecommerce will grow with the increased uptake of internet usage. There is huge potential and opportunity for local ecommerce to align to the rest of the globe and benefit from digital strategies as the appeal of convenience and security is driving more consumers to prefer a digital shopping experience. 

As the world finds ways to adapt to a new economic landscape, FNBB offers the ideal platform to help local businesses grow and ensure sustainability. The FNBB ecommerce platform facilitates online transactions and business activity to enhance opportunities and expand service delivery channels, with improved efficiencies. FNBB has partnered with a variety of businesses in order to address and develop effective solutions for their e-commerce needs. For instance, FNBB’s payment gateway enables the merchant to accept real-time card payments securely, 24 hours a day. A core focus of FNBB business is to understand our clients’ strategies, develop solutions that are aligned to these strategies and support our transition to a future forward economy. Therefore, it is never too late to join the bank driving lasting growth and positive change.

 Mokgosi is Relationship Manager and Kootsholetse Transactional Banker at RMB Botswana.