Guest Columnist Law and Technology

IMPACT OF FINTECH ON E-COMMERCE – Tobiloba Oluleye & Israel Adeyemo

INTRODUCTION
Financial technology (Fintech) is causing huge disruptions in the financial sector. It has transformed the financial industry in many ways as basic financial services are now being delivered through different technological innovations, which were previously unimaginable. Electronic commerce (e-commerce) industry is one of the fastest-growing industries in the global economy. Global retail e-commerce sales are projected to reach twenty-seven trillion dollars ($27 trillion) by 2020[1]. Fintech is capable of improving the sales and the way of doing things in the e-commerce industry even further due to the several opportunities associated with Fintech. It is therefore very imperative to explore the impact of Fintech on e-commerce. However, firstly, we shall be discussing the concepts ‘Fintech’ and ‘E-commerce’.


Fintech
Fintech is a combination of the words ‘Financial’ and ‘Technology’. It is the process of using technology to deliver financial services and products to consumers. Fintech companies and start-ups have been expanding with technological innovations in areas such as money lending, insurance, mortgage, and deposit of money, fundraising, retail banking, money transfers/payments, and investment management. These functions have been taken away from the realm of the traditional financial institutions as consumers can now freely do money transfers, payments, deposits, fundraising, etc. from the comfort of their homes just by using their mobile phones instead of joining long queues and going through avoidably stressful processes in commercial banks.


There are many examples of Fintech start-ups in Nigeria. In the payment landscape, for example, there are Flutterwave and Paystack which make online payments easier. Fintech has introduced digital solutions to manage our finances with the likes of Kudi (money), PiggyBank, Invoice NG, etc. Also, PayLater, CowriePay, and Quickcheck have contributed to the rise of alternative lending, making lending much easier, cheaper and faster. In addition, Appzone provides services such as retail banking cloud solutions, personal banking cloud solutions, commerce cloud solutions, branchless and agent banking cloud solutions, etc. eTranzact in Nigeria has taken the electronic transaction switching and payment processing process to another level with a global reach. There are also Cryptocurrencies and Blockchain such as Bitcoin which have taken the investment world by storm.


E-commerce
E-commerce refers to buying or selling of products and services over the Internet by using mobile phones, internet, email, etc., and the transfer of money and data to complete such transactions. E-commerce has grown quite popular due to its countless benefits. It is even feared that it may replace the traditional brick and mortar stores. E-commerce makes the business of buying and selling things so much easier. Business owners can run online retail stores without having to worry over the overhead cost of running physical shops and the business owners also have a wide global reach. Also, consumers can get their products from the comfort of their homes at any time of the day without going through the stress of physical markets.


There are different categories of e-commerce. They include:

Business to Business (B2B);

Business to Consumers (B2C);

Consumer to Consumer (C2C); and

Consumer to Business (C2B).

These classifications are predicated on the type of parties involved. B2B e-commerce is an online transaction that happens between two businesses without the involvement of the final consumers such as wholesalers and retailers. B2C e-commerce happens when a Business sells products or services online to consumers. Examples of these e-commerce websites include Amazon, Jumia, Konga, Payporte, etc. C2C e-commerce takes place directly between two consumers. For example, a consumer can sell his products such as used phones or newly bought shoes by uploading it to the website for an interested person to buy. Examples of this include OLX, Jiji.ng, etc. With C2B, a consumer can directly sell his products or services to a business, such as when a freelancer offers his writing services to any interested business or a social media influencer offering to help influence brands on his accounts for a token.

IMPACT OF FINTECH ON E-COMMERCE
As stated above, e-commerce involves online transactions which is a disruption of the regular face-to-face mode of exchange that comes with commercial relations. Therefore, the need to make payment faster and less strenuous to match the demands of the increasing rise of e-commerce therefore comes handy. It is against this backdrop that the impact of Fintech on E-commerce will be discussed.

Cyber-Security
Before the advent of the various fintech outlets that exist today, one of the greatest fears of parties to online transactions was the security of their identities and shared information. A consumer who intended to purchase an advertised product or services online had grapple with the dilemma of going ahead to pay for that which he desired at the risk of disclosing important details regarding his identity and finances, which if accessible to the wrong persons or entities, could be detrimental to his financial interests.


The rise of fintech solutions has exiled this fear almost into extinction. Fintech guarantees reliable cybersecurity – safety of information shared on various fintech platforms related to a specific e-commerce transaction. For instance, payment for transactions are now concluded via exchange in cryptocurrencies, a derivative of the blockchain technology which is an incorruptible digital ledger of economic transactions that can be programmed to record not just financial transactions but virtually everything of value[2]. This technology therefore keeps the identities of the transacting parties away from the fore but still stores information as regards such transaction in a very secure and encrypted form, i.e the block, for reference purposes.


With the confidence that information shared on the internet while attempting to make a commercial relationship is secure, parties are now more convinced to opt for online transactions.


Ease of doing business and increased reliability:
Up until the advent of fintech and its adoption by e-commerce, what obtained was long queues at the various banks (which services were only available during weekdays), where persons intending to make payment for their desired products and services had to effect the payments. Fintech has salvaged and banished this strenuous process since its introduction to e-commerce. Consumers can now complete their transactions anywhere and any day, at their convenience. This ease of transaction has indeed solidified consumers’ assurance of safe online transactions.


The notably swift refund of funds which is now made possible and easily achieved through the various fintech platforms such as Amazon, Harvest, Razorpay has continued to increase consumers’ confidence in e-commerce. Amazon provides instant refunds which are either issued to the customer’s credit card or as an amazon.com gift card balance[3]. Also, Razorpay, a Bengaluru-based fintech boasts of availing customers refund of payments made, although with an occasional delay of 5-7 business days caused by intermediaries like banks and networks.[4]


Furthermore, the seamless transactions made possible by the open and easily accessible payment alternatives created by fintech has played a key role in ensuring that e-commerce outlets gain more credibility, thereby affording them more patronage as opposed to how it used to be with the fixed stores known to commercial activities before now. Using platforms like Paystack, Amazon pay, etc, customers can easily pay for products or services without having to wait a long queue at the banks or at the retailers’ counter. E-commerce has gained expansion by this opportunity enabled by the introduction of fintech.


Development of Startups and SMEs
One notable influence of fintech over e-commerce is the increased rate at which e-commerce platforms are springing up and developing. This is because fintech has created avenues for their establishment and promotion. For example, the establishment and growth of these small and medium enterprises (SMEs) and startups can be accredited to access to seamless and stress-free loan facilities provided by fintech, which gives them a starting capital and a continuous working capital for their intensive operations. In Nigeria as a matter of fact, there exist at least two key peer to peer lending platforms, viz, KiaKia; and FINT[5]. These platforms assist investors with their capital requirements. This has indeed made e-commerce a wider terrain for business activities.


Increased awareness for consumers’ satisfaction
The various fintech options utilized by different e-commerce outfits have a record of transactions made by different clients on e-commerce platforms. This means that the fintech platforms can conduct analysis of the purchase preferences and buying patterns of different consumers. Through this analysis, the fintech outlets keep e-commerce outfits informed on their consumers’ preferences and needs based on the recurrence of orders which such consumers have made over a specific period of time. This update would often guide the e-commerce outfit under consideration on the types of advertisements to be directed to such consumers which would boost consumers’ awareness on their prefeered products and the availabitlity of same. This would in turn lead to increased patronage and increased relevance of e-commerce.


CONCLUSION
The connection between the two industries, Fintech and e-commerce is inevitable as they share a symbiotic relationship. Fintech has devised different technologies to make the process of payment, transfer of money, etc. easier and more accessible. Fintech’s greatest contribution to e-commerce has been its alternative money transfer and payment systems such as mobile payments, internet transfers, crowfunding, digital currencies, etc. to the population who do not have bank accounts, credit cards or debit cards.


Consumers can now freely access these e-commerce websites from their homes and at any time of the day by making use of several Fintech solutions. This may not have been possible before the advent of several Fintech solutions. This goes to show the several opportunities that Fintech offers the e-commerce industry. This conclusion is further strengthened by the rate at which Fintech is promoting the growth of e-commerce in other developed countries.


The Fintech industry, therefore, needs to be properly explored by the e-commerce industry to take advantage of the opportunities. Furthermore, there is a need for a proper regulatory framework to regulate these two industries and control the use of Fintech in e-commerce to promote the development of the two industries.

ENDNOTES

[1] ‘Ecommerce’ (Shopify, undated) https://www.shopify.com/encyclopedia/what-is-ecommerceaccessed 7 November 2019.
[2] Don and Alex Tapscott, authors of the book Blockchain Revolution.
[3] ‘About refunds’ (Amazon, undated) https://www.amazon.com/gp/help/customer/display.html?nodeld=201819300 accessed 26 March 2020.
[4] ‘Now get instant refunds on your online payments’ (ETBFSI, January 20 2020) www.google.com/amp/s/bfsi.economictimes.indiatimes.com/amp/news/fintech/now-get-instant-refund-for-your-online-payments/73332781 accessed 26 March 2020.
[5] Adesola Afolabi, ‘Peer-2-Peer lending Growth prospect in Nigeria market where FINT, KiaKia are “loan” rangers’ (Businessamlive, February 2020) www.google.com/amp/s/www.businessamlive.com/peer-2-peer-lending-growth-prospect-in-nigeria-market-where-FINT-KiaKia-are-loan-rangers/amp/ accessed 26 March 2020.

ABOUT THE AUTHORS


Tobiloba Oluleye is a seasoned legal practitioner who provides first hand advisory and transactional legal services to a broad spectrum of local and foreign clients.

Tobi holds a Bachelors degree from the prestigious Obafemi Awolowo University, Ile-Ife, Nigeria where she graduated as one of the best students; bagging the Hon. Justice Orojo prize for Best Graduating Student in Law of Business Association and F.G Adewole prize for Best Student in Criminal Law respectively.

Tobi, an Associate of the Institute of Mortgage Brokers and Lenders, Nigeria, interned with an array of reputable law firms such as Wole Olanipekun and Co. and Perchstone & Graeys. Upon her call to the Nigerian Bar, she served as an Associate in Nigeria’s foremost law firm, Aelex Legal practitioners and Arbitrators

Israel Adeyemo is a legal practitioner, versed in several areas of law including Fintech, and Transaction/Deal & Legal Advisory Servicing on diverse subjects as they relate to national and multinational clients.

He has held different leadership positions and participated in various seminars and conferences on transaction, finance and technology.

Israel is currently an associate at the law office of Seni Kusamotu and Co.

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