Year 2022 - Digital business platforms and insurance intermediaries GO HAND IN HAND 數碼營商平台與保險中介業並駕齊驅

26 2021 年刊與 2022 展望 YEARBOOK 2021 & PROSPECT 2022 專題探討 FEATURE Entering the New World of Trade Multiple times a day you hear about how the Covid-19 pandemic changes how lives are lived and businesses are conducted. With the general public spending bulk of their time indoors, B2C e-commerce has undoubtedly flourished. The trend did not stop there. Lately we have noticed a shift of B2B business moving online, surging innovation, digital transformation and application programming interface (API) support. As the global leader in trade credit insurance, we are monitoring this shift very closely, and we see this as the New World of Trade. The global B2B e-commerce market is already six times larger than that of B2C. It is projected to grow at 17% CAGR until 2027, pumping the market size to EUR21 trillion. While 95% of B2B buyers prefer paying on credit terms, just as they do when buying offline, only less than 10% of e-merchants offer such option. How to bridge that gap? This is where Buy Now, Pay Later (BNPL) comes into play. BNPL refers to short-term financing that allows buyers to make online purchases and pay for them at a later stage. From the buyer’s perspective, think of it as shopping with a credit card, minus the physical card and application paperwork, and very often, interest free; from the BNPL provider’s perspective, though, this creates a payment risk episode hence a credit insurer is usually involved to provide cover for such transactions. Let’s look at the actions backstage. Right when the buyer chooses the BNPL payment option after filling the online shopping cart, the BNPL provider will tap the credit insurer’s business database through an API for an instant go/no-go creditworthiness check. If it is a go, the buyer will be granted a certain payment term; the BNPL provider will immediately advance payment to the e-merchant; while the insurer will provide insurance cover for potential payment default. Alternatively, there are digital products already available in the market which give e-merchants the ability to offer credit terms directly to buyers through real-time API decision without a BNPL provider involved. Data and analytics are the key API enablers. Capable credit insurers would have to build a specific catalog based on years of credit assessment and underwriting experience. Needless to say, underwriting instant decisions online is very different from a traditional offline business, adjustments would have to be made to these products. Exploration should not be underestimated and agile methodology is obviously the way to drive any innovative product. In conclusion, deferred payment is important for businesses, SMEs in particular, to expand their business with e-commerce merchants as it allows them to better manage their working capital needs. The line between online and offline is no longer distinct. Brick-and-mortar players are rushing online and scaling up their digital operations. At the same time, the ability to offer the same in-store experience and services to online shoppers becomes the game-changer. As research showed 29% of B2B buyers opt to abandon the shopping carts if their preferred payment method is not available, option such as BNPL is vital for any B2B e-commerce player to grasp the enormous business potentials from the New World of Trade. Paul Flanagan Regional CEO at Allianz Trade in Asia Pacific