Innovation or irrelevance: The price of digital disruption

Much has been written about the existential threat that Amazon represents to Australasian retailers and it seems almost certain that there is much more to come – after all Amazon has yet to actually open in Australia or New Zealand.

As reported in February this year, Amazon accounted for 53% of all US online retail sales last year, and as online sales growth far outpaces that of bricks and mortar retail, New Zealand retailers have due cause to be wary.

That being said, Amazon is just the latest guise of the combined business threats of innovation and competition in the marketplace. And retailers will freely acknowledge that to ignore these key drivers is to risk becoming irrelevant.

Ultimately, customer demands are what drives most innovation and the rise of eCommerce has resulted in a shift in the way people consume.

Recent research from PwC found convenience was the highest ranked reason for why people shop online.

Survival of the fittest comes to mind.

As Internet 2.0 first became ingrained in society, many retailers originally saw eCommerce simply as an additional arm of their business that would complement physical stores. Those that didn't adapt learnt a hard lesson.

Today, consumers continue to demand more flexibility and increased convenience, and businesses that are able to react to disruptive trends are able to capitalise.

Retailers are now considering what incremental improvements can be made to help their conversion rates, marketing, delivery and, at its core, to help their customers.

Fintech and payments technology is simply an additional tool for retailers to meet their customer's expectations.

Originally, the term fintech (financial technology) was applied to technology responsible for the back-end of established consumer and trade financial institutions.

However, by 2010 the term's definition expanded to include any technological innovation in the financial sector - including innovations in peer to peer finance, investment algorithms and even crypto-currencies like bitcoin.

Retailers have often looked to efficiencies in the payment systems they adopt. Now, with the advent of solutions like PartPay, provision of credit via fintech is moving into point of sale, even for relatively low order value items.

New Zealand has one of the highest rates of electronic payment in the world. In July 2017 alone, the country made 137 million electronic card transactions totalling $6.7 billion nationwide.

The convenience of simply being able to swipe and pay is ingrained in our culture, so it's not surprising to see people relying less and less on using physical cash.

Systems like Apple Pay, Android Pay and Samsung Pay let you connect a credit or debit card to your smartphone or smartwatch so the trend away from cash is already becoming a trend away from cards.

This is highlighted by  a report published by Allied Market Research earlier this year, the global mobile payments market is estimated to reach over $3 trillion by 2022.

This has been happening for a few years, but this all links back to giving people the tools they need to use their time and money flexibly. It all comes down to convenience.

One of the main industries to feel the effects of fintech development is finance.

Suddenly, people are capable of more control and input over their own finances.

It is often the case that traditional point of sale financing relies on a meaningful portion of customers paying high interest rates after the end of an "interest free period" in combination with a number of establishment and annual fees as well.

Simply, it relies on a group of customers paying more in the long run which results in an underlying misalignment between the interests of the credit provider and the consumer.

This misalignment is not lost on the consumer and is part of the reason debit cards (as opposed to credit or eftpos cards) have grown significantly.

Debit cards give people access to use their own funds for online purchases and for use with services like Netflix and Uber.

But debit cards do not allow for the spread of the cost of an item similar to credit cards (which come with fees and high interest rates).

A fintech solution like PartPay puts the power back into the hands of modern consumers who rate fluidity and speed above all else.

Being able to use your debit card (or credit card) and split payments into manageable instalments while receiving your product or service immediately provides the freedom to spend flexibly in the modern era.

Consumers who make their payments on time aren't charged fees or interest like they would with traditional credit cards or lending schemes.

Instead of simply selling to the customer, the most nimble retailers see themselves as part of fulfilling customer needs from end-to-end.

Product, price, and customer experience as well as payment flexibility are all critical to retail success in the modern era.

Article by John O'Sullivan, PartPay director and founder