Ecommerce and fintech interconnection

Ecommerce and fintech interconnection

Today the concept of ecommerce became a part of our everyday life and confidently serves for the benefit of consumers. Ecommerce, also known as electronic commerce or internet commerce, is dealing with buying and selling of goods or services using the internet, transfering money and data when performing the transactions. Most often ecommerce is associated with the sale of physical products online, but actually it refers to any kind of commercial transaction carried out through the internet.

Ecommerce is designated to make the purchases of products through online retailers and marketplaces easier. And the essence of the industry brings benefits to freelancers, small businesses, and large corporations enabling selling of goods and services at a scale unobtainable through traditional offline retail. There exist four main types of ecommerce models that can describe almost every transaction:

Business to Consumer (B2C) – When a business sells a good or service to an individual consumer. e.g. You buy a pair of shoes from an online retailer.

– Business to Business (B2B) – When a business sells a good or service to another business. e.g. A business sells software-as-a-service for other businesses to use.

Consumer to Consumer (C2C) – When a consumer sells a good or service to another consumer, e.g. You sell your old furniture on eBay to another consumer.

Consumer to Business (C2B) – When a consumer sells their own products or services to a business or organization, e.g. An influencer offers exposure to their online audience in exchange for a fee, or a photographer licenses their photo for a business to use.

Ecommerce is also replete with  the forms of its implementation establishing different transactional relationships between businesses and consumers, as well as enabling the exchange of different products as part of these transactions. These forms include:

  • Retail – the sale of a product by a business directly to a customer without any intermediary.
  • Wholesale – the sale of products to a retailer that then sells them directly to consumers.
  • Dropshipping – the sale of a product, manufactured and shipped to the consumer by a third party.
  • Crowdfunding – getting money from consumers in advance to raise the startup capital necessary to bring the product to market.
  • Subscription – the automatic purchase of a product on a regular basis until cancellation.
  • Physical products – any tangible good that requires inventory to be replenished and orders to be physically shipped to customers as sales are made.
  • Digital products – downloadable digital goods, templates, and courses, or media that must be purchased for consumption or licensed for use.
  • Services – a skill or set of skills provided in exchange for compensation. The service provider’s time can be purchased for a fee.

Fintech for Ecommerce

You can see that ecommerce is densely integrated in our everyday processes associated with the purchase of goods and services. At the same time, in search of new payment methods, the rapid rise and evolution of online commerce gives rise to another important industry such as Financial Technology. Fintech is a common practice of applying technology to the financial services sector, where ecommerce is not an exclusion.

Though recently financial technologies were mainly utilized in banking, accounting and back-office services, nowadays, due to advances, different startups actively promote to adoption of financial services in ecommerce. Crowdfunding, e-wallets, and mobile payments are examples of most widely used fintech applications. Extreme popularity is also focused on cryptocurrencies as another outstanding example of fintech.

Fintech made the greatest contribution to ecommerce in general mainly influencing the improvement of online payment system. Fintech has provided alternative payment methods for countries experiencing problems with credit or debit cards or restrictions for performing bank transfers. Without fintech cross-border payments and as a result cross-border ecommerce would not actually be possible.

So, each time the consumers are using PayPal, Apple Pay, or Google Wallet when making international money transfers, they are definitely using fintech. Such platforms as  Dwolla, Stripe, WePay, and BlueSnap integrating with ecommerce platforms also serve for the efficiency and security of ecommerce sector.

Blockchain Technology in service of Ecommerce

Blockchain can by right be considered one of the most successful applications of fintech. It was brought to life to send payments between two parties digitally and anonymously with no need to verify the transaction. It was created to facilitate the process of funds transfer and became the operating system for all cryptocurrencies.

It is important to understand that blockchain`s  concept and its underlying framework is created to provide companies with secure digital option to provide payments alternatively. It allows merchants and consumers to transact using cryptocurrencies and in addition record transactions.

Here are the main benefits merchants and consumers get from impleneting blockchain as the leading «representative» of fintech:

Mobile payments. The main problem with mobile payments is security risk. Blockchain excludes mobile payment fraud by recording all transactions in the distributed ledger.
Authenticity of products. Blockchain can help us to determine whether the product is authentic having all the necessary details about every touch point of the product and being able to track the product in the supply chain from the manufacturer to the distributor. This will definitely help to avoid losses or production of fake products. This capability is extreamly important when we deal with luxury goods and also one-of-a-kind merchandise, such as art, or time-sensitive items, such as concert tickets.
Smart contracts. Retailers who sell to other businesses regularly create contracts. Blockchain can set up multiple types of contracts to be used across many customers.
Intellectual protection. Blockchain also helps to register original content that needs to be secured on blockchain, with this providing the proof of ownership of that content.
Identity management. The technology also excludes identity thefts. This is guaranteed through the assign of  a unique code to a person and that code can later be used to verify identity.
Crowdfunding. Crowdfunding is popular among merchants and inventors to raise money. Blockchain has made it easier to raise funds via cryptocurrencies.
Advertising. Retailers practice to offer a few bitcoins (or any other cryptocurrency) to customers who click on an advertisement making it easier for advertisers to get clicks and for customers to get more information about the product.
Marketplaces. Marketplaces take a cut of each transaction. An example is the Apple App Store, which receives a portion of every app that is purchased. Blockchain can eliminate these third parties by building a marketplace that supports peer-to-peer sharing.

Summing up we can conclude that fintech actually appears to be the technology laying directly under ecommerce. It enables consumers to receive and manage their funds that are actively used for eCommerce purchases. Today’s fintech advancements are enabling eCommerce companies to provide the services they could not think about in the past. The world of online purchases becomes open up to people and people get the chance to enhance their financial power. Fintech and its startups will definitely serve as a driving power to revolutionize ecommerce in the future.

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