SFF GREEN SHOOTS SERIES: CROSS-BORDER E-COMMERCE
Aug 21, 2020
On 21 August 2020, we were joined by three payment giants on our Green Shoots Series, Ari Sarker, (Mastercard), Cameron McLean (PayPal) and James Shanahan (Revolut Singapore). Our speakers discussed key trends emerging from COVID-19 in cross-border e-commerce, including:
- Consumer behaviour trends in the wake of COVID-19 – what does the data indicate?
- With traditional retail taking a beating, how viable is cross-border e-commerce as the solution to retailers’ woes?
- Can payments play a bigger role than simply being the last leg of the purchase chain? How can the tail wag the dog?
- Q&A with Speakers: below
- We ran a poll during the session. Results below!
- Watch a replay of the session on our YouTube channel here. Do follow our channel Singapore FinTech Festival for more videos.
- Want more? Check out upcoming Green Shoots sessions on our website here.
- SFF x SWITCH 2020 returns on 7-11 December. More here
Let us get through this together and be stronger, when the green shoots start to appear.
Q&A with Speakers
Question: Beyond big ticket items such as furniture and IT equipment to support work-from-home arrangements, has the average $ per transaction reduced relative to the pre-Covid-19 period?
Response: James Shanahan - Contrasting spend between pre circuit breaker (Jan - April) and the past 3 months (Jun - mid Aug), we see strong growth in average $ per transaction. Overall average spend has increased by more than 10% in the last 3 months. Average spend per transaction has increased by 18% for local e-commerce and 12.5% for cross-border e-commerce.
Question: Are there any observable key differences in the online payment behaviours and usage amongst the US, Europe and Asian markets?
Response:James Shanahan - Customers rapidly change behaviours as macro environmental factors are introduced or removed. As COVID related measures are introduced or eased at different times around the world, we see fluctuations aligned to timings.
Question: The explosion of growth in e-commerce might lead to greater concerns on data privacy and security issues. How is the industry tackling these challenges and helping consumers feel at ease when making payments online?
Response: Ari Sarker - Consumers care most about security and convenience. Offering them both consistently, with every payment, is what builds trust. We do this by providing safety before, during and after the transaction. Persistent authentication automatically verifies users at the point of login; tokenization, 3DS 2.0 and risk-based scoring protect users during the transaction; and post-transaction data analytics feed into future transaction scoring. The beauty of this process is that the current cybersecurity technologies do not make users compromise between security and a frictionless payments experience.
Response: James Shanahan - From an industry perspective, financial institutions have to be constantly vigilant and updated on the latest phishing scams to develop counteractive/preventive measures. At Revolut, we are proud of our proprietary virtual and disposable virtual cards meant for one-time usage to protect our customers for online payments. Globally, close to 30% of our customers have a virtual card; out of which 10% of virtual card holders have a disposable virtual card with us for online transactions.
In-house, our anti-fraud system provides real time alerts of fraudulent activity - based on statistics and machine learning that allow the system to learn and be more accurate in fraud detection. In-app, we have an additional layer of security for customisable features where customers can toggle and turn off certain features of the Revolut card to mitigate the risk of fraud, such as disabling/enabling ecommerce payments, cash withdrawals, and contactless/ swipe payments.
Question: With urgency to capture sales, how can retailers access solutions that are easier and faster on the integration front?
Response: Ari Sarker - While there are many solutions available that can help SMEs to integrate faster - payment gateways, hosted storefronts, cybersecurity protections, and data analytics, to name just a few – the critical piece of the puzzle is that they must be pre-packaged as composite solutions rather than individual capabilities. Integrating the digital solutions makes it much easier for SMEs to quickly adopt them with minimal lift, and ultimately, go online.
Question: What are the potential harmonisation / interoperability measures that regulators and cross border payments companies are looking at for B2B payments? What are your views on the related risks?
Response: Ari Sarker - Cross-border trade is still fragmented so harmonisation requires integration on many fronts ranging from e-commerce platforms, to logistics, payments and more. Though much needs to be done, it’s urgency and importance cannot be overstated as interoperability with global tech standards is critical in a digitized world. Siloed environments – or digital islands – create a situation where you’re only as good as your weakest link.
One example of how we’re tackling the issue from both regulatory and technology perspectives is our initiative with the Singapore government. Together we’ve developed a pioneering hybrid data and solutions hub called BSB (Business Sans Borders). It is supported by financial services and powered with self-learning AI to help businesses manage their B2B cross-border commerce processes.
Another example is Mastercard TrackTM Business Payment Service which digitizes B2B payments that are often rooted in legacy practices established decades ago (think cheques). Mastercard Track is the first global open-loop commercial service built to simplify and automate the way businesses around the world pay and get paid.
Question: Where do you see innovation in B2B cross-border transfers coming from? Do you believe that banks will jointly cooperate in order to make this process less complex or do you think a new entrant could disrupt this market?
Response: James Shanahan - Cooperation and alignment at international level amongst regulators/national schemes is the likely next phase of innovation. Ideally, integration between national systems will greatly strengthen and streamline cross-border payments.
Question: How do you view the disruptive potential of blockchain and DLT in the payments space? Is this on your radar and are there any initiatives in the space that you are currently pursuing?
Response:Ari Sarker - Blockchain, which is built on DLT (distributed ledger technology), brings an added layer of security for any distributed peer-to-peer network with unknown participants. The technology presents a massive opportunity to disrupt B2B payments as it can enable faster and more transparent cross-border transactions. Beyond payments, we’re also working on blockchain initiatives ranging from enabling luxury houses to offer digital verifications of authenticity to helping food supply chains with transparent sourcing.
Question: COVID-19 has substantially accelerated the adoption of electronic payments. What is the next major payments innovation needed to drive 100% adoption, especially in emerging economies?
Response: Ari Sarker - Financial inclusion and access to digital payments continue to be a challenge for millions across Asia Pacific, so much innovation effort still needs to go towards covering the last miles to these individuals. As the world fully digitalizes, we must provide easier and fully protected ways for people to exchange their identities online for transactions, information sharing and hundreds of other reasons.
To facilitate this, the development of digital identities is going to be very important. These digital identities need to be housed in a decentralized manner across the digital ecosystem – so no one entity holds too much data in a way that can be hacked – and they need to be universally accessible and useable to everyone. Much in the same way birth certificates are universally accepted forms of identification around the world, digital identities can be in the future. However, this evolution will take substantial time and investment and we’re still very much at the initial stages of the journey. Driving universal financial and digital inclusion is paramount.
Response: James Shanahan - Credit/ Debit card acquirers require a POS system but the rate of approval especially for credit cards in emerging economies is low. The proliferation of QR code, especially during the COVID-19 contract tracing efforts, has furthered the cause for QR code payment methods in Asia. This is especially so when payment by QR code is already present in many night markets/street vendors in emerging economies. The QR code has two modus operandi. First of which will be to develop a closed loop system, such as the WeChat model where the QR code only works if the users’ app is the same as the merchant’s app. An alternative model will be to adopt a nationalised standardised QR code similar to SGQR - where a merchant will have 1 QR code where all the e-Wallet apps can scan and pay to. For efficiency, there needs to be a unified payment interface that will be best driven by national efforts.
Question: Since the rise of everything digital, do you think businesses may lose the human connection with their customers? For example, paying your bill right after ordering your meal via a QR code might dilute a more personalised customer experience, and could also lead to a sharp decline in tips. How do you think the service industry can balance this?
Response: James Shanahan - In restaurant dining experience, food quality, ambience, location and value for money remain the differentiating factors for any F&B businesses. Going digital, with the adoption of digital menus and contactless payments, helps F&B eateries streamline their processes in menu design, menu updates and printing costs. Contactless payments where the POS may be portable help customers save time, such as allowing them to self-serve at the table. To be personalised, eateries can provide a more seamless experience. For example, diners can order from any seat simultaneously and view information on food sources and the nutritional value of the dishes.
Question: What are some of the challenges that payments apps face in enabling a frictionless experience and security for customers?
Response: James Shanahan - To drive a frictionless experience, the first question will be what are the pain points to be addressed or solutions FIs want to solve for the customers? It is upon the recognition of pain points that payment apps can look at removing those - be it costs, user journey, user experience, speed and/or convenience. On the backend, payment apps may have legacy systems or require system integrations, especially if the payment app acquires different entities. To enable a frictionless experience with enhanced security for customers, the tech stack/ architecture must be developed in-house, modular and agile such that each new product feature can be replicated quickly across markets with minimal development efforts.