5 Cash Flow Challenges that Stall E-Commerce Growth

In the past two years, eCommerce growth has been tremendous. But, without watching your cash flow, eCommerce growth will be at risk.

With sales hitting nearly $4 trillion in 2020, online shopping has seen a huge spike driven largely by COVID-19. But even as the world recovers from the impact of the coronavirus on everyday life, this e-commerce surge will only continue to grow.

Globally, online sales are expected to reach $5 trillion in 2022 and $6 trillion by 2024. And in 2021, while online sales accounted for a whopping 19.6% of all retail sales, that number is anticipated to jump to 25% by 2025.

With more than 2 billion people shopping online worldwide, it’s more important than ever for your business to have a strong e-commerce platform backed by sound banking practices that eliminate security vulnerabilities and processing delays, ensuring cash flow is steady and consistent as the business grows.

Processing online sales have its challenges, though, especially when it comes to finding a bank that easily handles digital sales at a global level.

As you grow your business’ eCommerce sales, here are some of the top challenges to your financial health you might encounter and how to overcome them.

Data Storage Cybersecurity

When transferring money digitally for online transactions, address security concerns for both buyer and merchant. Cybersecurity threats will only increase as global eCommerce continues to grow.

In 2021, the number of reported data breaches skyrocketed, jumping 68 percent. There were 1,862 data breaches reported last year – going far beyond the 1,108 breaches reported in 2020 and the record number recorded in 2017. These data breaches, which ran the gamut from social media users to those shopping with major retailers, impacted 5.9 billion accounts.

These 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. These data breaches 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.

You can 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.

Cross Border Payments

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 – financial transactions between buyers and sellers in two different countries – 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.

Returns and Refunds

There are a lot of factors that can impact a consumer’s online shopping experience;  having a flexible return policy will likely not only improve your business’ relationship with a shopper but also increase your chances of winning a loyal customer.

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 in place is good for business. But as you create this policy for your company, consider your digital banking platform and how easy it is to process 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. But it can take longer – up to 30 days, in some cases – depending on the financial institution used. This can significantly affect your business’s 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. As you choose banking and e-commerce platforms for your company, review how these systems handle refunds and select the one that offers the quickest, easiest process for your customers. 

Technical Issues

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 these rejected payments.

Banks and payment processing companies often schedule regular downtime for maintenance, though they typically try to schedule it during times with low traffic and usage. Security alerts can stop an online payment with banks tracking customers’ spending habits as criteria to authorize transactions. There could also be a misstep during a bank’s authorization process, often related to data verification of submitted payment information.

There are several solutions for online retailers to consider when addressing technical issues. Consider using an advanced eCommerce payment platform that can handle multiple payments. A common fix is accepting multiple online payment types. If one payment fails for a customer. alternative methods are available to the customer.

Fraud

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 should it happen and require shoppers to input their Card Verification Value (CVV) security codes for many 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.

Rely on Fyorin for your eCommerce Banking Solutions

Fyorin offers a financial operations platform that automates and monetizes the money flow for businesses across a curated network of financial institutions. Enabling 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 having real-time visibility of their cash position. Some of the capabilities it provides are; multi-currency accounts, virtual cards and direct connectivity with your preferred accounting solution and banking partner.

.