Trading on the internet is generally a business with unknowns – and that harbours risks that need to be countered if you don’t want to get caught out. What’s more, the competitive environment is tough and customers are demanding. Nobody wants to alienate potential buyers with excessive onboarding and verification procedures right at the start of the transaction. Or wants to cause additional frustration for the customer at the other end of the checkout by not offering a specific payment method. If this also applies to you, you should definitely read on.
Before e-commerce really took off in the 1990s, there was already a widespread, impersonal form of selling: catalogue sales. Mail order companies took a certain amount of risk here, unless they traded on the principle of ‘money for goods’. This is no different today in online retailing: here too, it is an essentially anonymous transaction in which the retailer usually pays in advance. The process is also prone to errors and fraud. Nevertheless, if incorrect information is provided by the buyer, this does not always have to be done with malicious intent. For example, a classic and easily made typo is accidentally omitting the last number when copying and pasting the IBAN.
In both cases, the consequences are unpleasant for everyone involved. The transaction is not completed, which initially annoys the customer as they are unable to finalise their purchase. For the retailer, this means damage and loss of reputation in the event of fraud and – regardless of whether it is an attempted fraud or a typo – they also have to go to considerable effort to correct the incorrect information in their system.
So what can an online retailer do if they don’t want to insist on advance payment and want to offer their customers a wide range of payment options, including the popular SEPA direct debit scheme or online credit?
Financial information is key
Buyers who want to do business on the Internet must disclose their account details. The information hidden in account transactions in particular can provide information about many aspects of the unknown customer – if the recipient can access, read and use this data correctly. This allows potential dangers such as cybercrime, data breaches or fraud to be recognised and averted at an early stage.
To do this, you first need access to the potential customer’s financial data, preferably in real time. Of course, this is only possible if the user has explicitly agreed to share their data with third-party providers beforehand. Another hurdle is that access is only granted to authorised and regulated companies – such as Qwist.
It is then necessary to check – also ideally in real time – whether the identity provided matches the account data stored. Once it is clear who you are dealing with, the next logical step is to check the customer’s creditworthiness: the transactions on the account in question can be used to gain insights into financial and risk behaviour, current financial status and solvency. Modern AI-supported verification solutions usually provide far more detailed information than conventional credit agencies such as Schufa.
Online loans as a sales booster
Incidentally, banks that grant loans do not take a different approach here: Checking the applicant’s creditworthiness is also essential here. However, loans are no longer exclusively requested from a bank: online shoppers today expect to be able to not only apply for a loan for financing directly in the shop, but also to be approved almost in real time when purchasing very high-priced products such as jewellery or designer furniture or simply extensive shopping baskets. Online retailers should not underestimate the importance of the fact that providing a wide range of payment options is crucial to catering to the different preferences of visitors. Very often, if their preferred payment method is missing, potential buyers will abandon their purchase.
Online financing integrated directly into the shop offers a whole range of advantages for buyers and retailers: Customers can apply for an online loan for their high-priced goods directly in the shop without any media disruption and receive notification of their application almost in real time. This increases the likelihood that the purchase will be finalised. The retailer can thus tap into new groups of buyers and improve the loyalty of existing customers. The sale of expensive products and larger shopping baskets naturally also generates more turnover, not least thanks to better opportunities for cross-selling and upselling. In the highly competitive online retail sector, offering attractive online financing with reputable banks in the background can be a decisive competitive advantage. Working with these banks also reduces the risk of non-payment for retailers – which brings us full circle and back to the risk minimisation measures that are equally important for online retailers and banks.
Experienced partners for smooth implementation
Does it all sound very complicated and like a lot of effort? It doesn’t have to be – if you want to make your shop fit for the future and make your customers happy from onboarding to checkout, you can rely on the help of experienced industry experts like Qwist. Qwist covers the entire ecosystem of the open finance world and offers products for all important users and needs.
With Financial Ident Verification, merchants can seamlessly verify account ownership by accessing a prospective buyer’s bank account in real time, ensuring fast and secure customer onboarding. As a regulated financial institution, Qwist is authorised to provide data to e-commerce, even if the merchants themselves do not have a licence.
Qwist also has a convincing solution in its portfolio for optimising the checkout: The Financing Platform seamlessly connects digital retailers and marketplaces with leading banks and facilitates instant access to a variety of financing products so that customers can afford to buy high-priced goods by applying for credit directly in the shop.
It is therefore possible to satisfy the growing demands of customers while effectively minimising the risk that arises when trading with unknown parties – with the right partner from the FinTech world at your side.
From onboarding to checkout, Qwist has you covered: More information about our solutions ‘at both ends’ can be found here!
Click here for more informations
