5 E-Commerce Cash Flow Challenges

Last years have witness a remarkable growth in eCommerce with online sales reaching unprecedented levels. Largely driven by the pandemic the online sales hit an astonishing $4 trillion in 2020. The upward trend of eCommerce shows no signs of slowing down even with the time passing and the pandemic turning into a distant memory. Global online sales are projected to climb to $6 trillion in 2024. In 2021, online sales made up 19.6% of all retail sales, a figure expected to rise further to 25% by 2025.

As the number of online shoppers these days reaches nearly 2 billion, it is crucial for businesses to strengthen their eCommerce platforms with secure financial practices to ensure steady cash flow during expansion. This surge comes with financial risks, particularly if cash flow management is neglected. In this article, we explore the challenges and solutions associated with this rapid expansion in the e-commerce space.

When transferring money digitally for online transactions, security concerns rise for both the buyer and the merchant. In 2021, the number of reported data breaches skyrocketed, jumping 68 percent. There were 1,862 data breaches reported in 2021 impacted 5.9 billion accounts and those cybersecurity threats will only increase as global eCommerce continues to grow.

Security breaches could cost your business big bucks, including potential liabilities. On average, the cost of a retail data breach was $3.27 million in 2021. In the long run, it could also impact your brand reputation and customer loyalty.

There are a few easy ways for your company to protect itself from a data breach:

Select a SaaS-based eCommerce and payment platform; Ensure SaaS platforms have built-in security, with providers responsible for securing the platform, network, applications, operating system and physical infrastructure.

Protect data through tools and practices, with security providers checking your applications and cloud infrastructure for unauthorized and compromised cloud accounts, encrypting cloud data, checking your platform security, and applying role-based permissions to data collected so users only see the information they’re given access to.

In this increasingly global market, it’s not unusual for retailers to have an international customer base. And with online shopping, it’s easier than ever to reach consumers worldwide.

But cross-border payments are notoriously challenging when using traditional banks, even for global eCommerce companies. These transactions tend to move slowly, with lengthy processing times compared to domestic sales, which could affect your cash flow.

Doing business in multiple countries has traditionally meant companies holding a bank account in each of these nations and contending with the multiple fees that come with them. An easy way for businesses to address these issues, making cross-border payments less expensive, more transparent, and faster moving is by opening a multi-currency account, offered by some traditional banks and some leading fintech companies like Fyorin. Multi-currency accounts companies receive, send, and hold money in different currencies.

The turnaround time for a cross-border payment using a multi-currency account is much faster than a traditional banking business account. Handling an international transaction in your customer’s local currency speeds up processing times.

Having a multi-currency account also reduces your transaction costs. If you were to hold multiple accounts in several countries to deal with their local currencies, your business would be paying multiple monthly fees for each account. Having just one multi-currency account means fewer operating fees for your company.

There are a lot of factors that can impact a consumer’s online shopping experience and ensure ongoing loyalty; having a flexible return policy is one of them.

68% of online shoppers will review a company’s return policy before making a purchase. And if they have to pay for a return, nearly half of online shoppers – about 47% - said they’ll make that purchase elsewhere. Studies also show that when online retailers offer free returns, customers will spend up to 357% more than they did before initiating that return.

Having a customer-friendly e-commerce returns and refunds policy can be a game changer for the business. But as you create this policy for your company, consider your digital banking platform and how easy it is to handle these returns.

On average, it takes about seven days for a credit card refund to process and for those funds to be returned to a customer. However, in the case of some financial institutions it can take as long as 30 days, which would have a huge impact on your cash flow.

You can’t control which policies and processes your bank or point-of-sale system have in place for refunding money or how long it will take them to process those funds; however you can choose banking and e-commerce platforms that offer the quickest, easiest process for your customers.

E-commerce companies only bring in money when their websites, point-of-sale systems, and online banking platforms are up and running properly. And technical issues, whether online payment failures or banking or merchant website downtime, can be costly.

Failed payments, often caused by the inaccurate input of account numbers and beneficiary details, cost companies worldwide about $118.5 billion in 2020. About 62% of online merchants reported losing customers because of rejected payments.

The reasons for technical failures are various: from regular downtime for maintenance on the part of a bank or processing platform, security alerts from a customer’s bank or a misstep during a bank’s authorization process, often related to data verification of submitted payment information.

A solution to this problem is implementing an advanced eCommerce payment platform that can handle multiple payment options. If one payment fails for a customer. alternative methods should be available.

Online fraudulent activities cost eCommerce retailers more than $20 billion in 2021 – an 18% increase over the previous year. And a recent study found that about 82% of U.S. retailers have seen an increase in attempted fraud since the start of the COVID-19 pandemic. And as online shopping continues to become more prevalent, so will fraud against merchants and buyers.

There are several ways businesses can stay ahead by detecting and protecting their online shops against fraud. You can monitor your site regularly for suspicious transactions, such as inconsistent billing and shipping info for customers, larger-than-average orders, shipments to unusual locations, and multiple orders made during a short period.

In addition to conducting regular security audits of your website, you also need to ensure your payment solution is Payment Card Industry (PCI) compliant. Consider setting limits on purchases to keep fraud losses to a minimum and require shoppers to input their Card Verification Value (CVV) security codes for credit and debit cards at checkout.

Many banks and credit card companies offer their account holders address verification services and detect suspicious activities as they happen. This process verifies a credit card’s billing address submitted by the customer against the information on file with the card’s issuing bank adding an extra layer of security.

Fyorin offers a financial operations platform that automates and streamlines the money flow for businesses across a curated network of financial institutions. We enable businesses to scale without the need to grow their payment operations team. With Fyorin, businesses can cut down 90% of the manual work around receivables and payables whilst getting a real-time visibility of their cash flow. With features like multi-currency accounts, virtual cards, and seamless integration with accounting solutions and banking partners, Fyorin is the ideal solution to navigate the evolving landscape of eCommerce finance.

Interested in using Fyorin to elevate your e-commerce business growth? Speak with us at [email protected]