E-commerce: a roadmap for finance and treasury

Cash Management

E-commerce: a roadmap for finance and treasury

May 2020

EuroFinance and The Economist Group’s latest webinar reveals that many treasurers are now actively involved in their company’s digitalisation process

The Covid-19 pandemic has dealt a hammer blow to companies around the world and across multiple sectors. However, the phenomenon of millions of households in lockdown is already accelerating the growth of e-commerce.


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The webinar ‘E-commerce: a roadmap for finance and treasury’, hosted by EuroFinance and The Economist Group on 28 April and supported by Deutsche Bank, offered insights from finance professionals at two businesses with e-commerce at the heart of their offering: Dr Thomas Kremser, head of finance, risk and BI at Zalando Payments, the payment services arm of platform for fashion and lifestyle Zalando; and Xavier Fouré, e-commerce treasury manager at sports retailer Decathlon. They were joined by Ole Matthiessen, Deutsche Bank’s global head of cash management.

Session moderator Pascal Burg, a director of the consultancy Edgar, Dunn & Company introduced the three panellists and opened by inviting the online audience to vote in the first of two polls, which posed the following question and invited responses to the four options:

As treasurer, how involved are you in your company’s digitalisation journey?

Burg noted that although only one in six respondents headed the digitalisation process at their company, a significant majority were actively involved, before inviting Kremser and Fouré to outline the e-commerce strategy imposed by their companies.


A transformational journey

Kremser described Zalando, which promotes its platform as “Europe’s leading online platform for fashion and lifestyle”, with 31m customers over 17 markets. Zalando Payments provides the group with its payment services and aims to “place the customer in the driving seat”, so that he/she can decide where, when and how they pay for their purchases. So the ability to regularly extend the available range of payment option is important. To make these as localised as possible, Zalando currently offers a total of 22 different payment methods in eight different currencies.


Source: Zalando 

Decathlon has expanded from a sporting goods store in Lille, France, opened in 1976 to a retailer operating in 57 countries worldwide. Fouré, who joined the company in 2012, said that it works with a number of banks and payment service providers on a variety of projects and different payment methods, which are adapted to meet the local needs of each country in which it operates.

Burg noted that Deutsche Bank is active in both the business to business (B2B) and business to consumer (B2C) spaces and Matthiessen confirmed that the bank closely tracks e-commerce trends, working closely with its corporate clients to identify and respond to treasury’s needs.

He commented that the transformational journey undertaken by more traditional companies shows that digitalisation now goes much further and involves areas such as end-to-end processing efficiency and new client solutions. The journey was an interesting one for the bank too, with its role changing as treasury gets a bigger seat in the boardroom. As new digital offerings emerge from companies it was up to the bank to understand each customer’s individual journey.


A range of options

Burg then asked that how treasury goes about selecting the most appropriate payment method – particularly when companies like Zalando can offer as many as 22 options – while localising the customer experience as much as possible. Kremser said that the fashion platform uses research to identify where the market is developing and which payment methods are in demand. A client development team operates within each of the company’s markets. Testing the potential group for a new payment method is often simply a case of trial-and-error, although educating the market in adapting to new payment methods and behaviours is also possible.

Among Decathlon’s methods of maximising the potential of e-commerce, said Fouré, is offering all customers making a purchase upwards of €100, the option to pay using their bank card via three or four instalments. Customers can also pay up to 15 days from being billed and in this way if they place an order in the middle of the month they can carry the payment to the following month.


Source: Decathalon 

Asked whether Deutsche Bank’s clients ask for advice on e-commerce, Matthiessen said that it largely depends on the industry. As established online retailers, both Zalando and Decathlon have years of experience, but other companies may only be in the early stages of e-commerce and also may not have an established underlying business model.

Other influencing factors include the state of the industry in which the company operates, the degree of maturity of individual sales channels and the potential cost efficiencies offered by e-commerce. In some areas, it makes sense for a local partner to advise the company which option represents the best payment method.


Using payment data

The discussion turned to payment data and the payment options that can generate additional sales. Fashion retailing is an industry that drives a variety of payment methods, said Kremser, and the more successful players have customers who return a number of times, but only when the payment process is not overly complicated.

In France, which traditionally had no deferred payment methods, Zalando trialled its ‘try first, pay later’ option in 2016, after research found that customers disliked having to return items. Try first, pay later allows customers to fill their online shopping basket with as many items as they wish, without having to pay for them upfront. Instead, they have up to 14 days to decide and can then send back any items they do not wish to retain and delete their cost from the payment due. Kremser said the initiative had proved equally popular when rolled out from France to other countries, such as Denmark.

Matthiessen agreed that the right payment method can generate additional sales for retailers and other corporates. Finance and treasury can significantly contribute tosales growth, as the role evolves into a more strategic one that addresses the challenges of a global offering of goods and services, including payments in various currencies and cross-border flows, an automated end-to-end treasury workflow and the full leverage of FX solutions translating into business growth.

Many clients were only just starting out on their e-commerce route, a task that often involved a good deal of complexity. What is needed is a payments gateway – or a middle layer – to promote different settlement solutions, which a bank can help with by acting as a strategic partner. Get this feature right and it was possible to add significant value to the business.

The second of the two online audience polls followed, with the question, options and responses as follows:

What is the main objective of your company’s payment-related processes?

Kremser commented that the three objectives are related; for example reducing fraud enables the protection of existing revenues and generating additional ones.
In his own role as treasurer the question centred more around how well he knew his customer base and how well he could steer performance both in the front and back office.

Matthiessen agreed that achieving the right mix was important; so existing revenue still needed to be protected even when it was not the top priority, with treasury teams working to support the business development team.


Fighting fraud

Keeping the focus on back office operations, Burg noted that attack by criminals was a major concern; raising the question of how fraud rates can be kept low without overly demanding anti-fraud processes that deter online customers. Fouré said that in 2015 Decathlon trialled a scoring system that gauged the level of risk for bank card payments to detect those that were suspicious. This has been very successful and has since replaced the old system.

Kremser said that Zalando had to balance the twin demands of keeping up with new market trends and detecting fraudulent behaviour. The company had amassed data on when and how its customers make payment, which it could aggregate and had set up a revenue management department. In some cases, rather than immediately cut off identified fraudulent behaviour they followed it in order to find out more.

Matthiessen confirmed that fraud and reconciliation was a major challenge for banks and their corporate customers, particularly for e-commerce where a huge number of end clients had to be managed. From the bank’s perspective, all companies operating in the B2C space needed to rely on a proven partner, while B2B typically has a bigger volume of transactions.

The bank utilises machine learning to identify fraudulent client behaviour and transactions and treasury needs to decide whether to focus on preventing all potential fraud or to focus on repeated scams. The underlying treasury business model needs to follow the processes identified, so that revenue leakage can be mitigated, if not completely eliminated.


A future with Libra?

The next topic for discussion was future trends that are creating new opportunities. A question submitted from the audience asked whether newcomers such as Libra, the proposed cryptocurrency announced last June and overseen by Facebook, would have a place in e-commerce.


Kremser said that Zalando Payments had recently met with members of the Libra board in Berlin to discuss how cryptocurrencies might be more widely used in future. However, Libra was still only a niche product, while the technology behind it, blockchain, has wider potential applicability; for example smarter ways of issuing bonds to the market in future via smart contracts.

He suggested that offering cryptocurrency payments isn’t yet the way to go, although that situation might change in the future. For the time being, the technology supporting it is offers greater potential. Fouré agreed that Libra was still too new for it to be certain whether it would achieve wide usage; nor was it yet clear how easily customer could use it in payments.

“Over the next three to five years you’re likely to see more digital currencies and possibly more digitised central banks.”

Ole Matthiessen, Global Head of Cash Management, Deutsche Bank


Matthiessen suggested that Libra’s future depended on how relevant it was as a payment method to the end client. Deutsche Bank had adopted e-wallets as they were being used by the bank’s customers. The next three to five years was likely to see the launch of more digital currencies and possibly more digitised central banks. A question still to be answered was whether there will also be widespread take-up of smart contracts. However the bank had already seen the pace of change accelerating in recent years and was prepared for further change.


Data, biometrics and mobile

As moderators, Burg’s final question was to identify for those in treasury listening to the webcast which trend in e-commerce was the most relevant.

For Kremser the answer was easy – data will be the key differentiator and the better a company knows its customer, the easier it will be for them to develop customer-specific offerings catering to their individual needs. Fouré identified biometrics, which he said will help in identifying customers more easily and assist all those along the value chain. Open banking would bring about a real transformation and encourage the development of new platforms

Matthiessen suggested that in B2B, banks had probably underestimated the potential of mobile solutions, which will be more important going forward. One market study had suggested that it will generate US$40trn of sales by 2026, with mobile solutions increasingly assisting those working from home.

He added that the B2B market isn’t yet as well developed as B2C so better understanding is needed of the end-to-end requirements, such as the digital payments gateway – getting this layer right “will be make or break”.

The EuroFinance/Economist Group webinar, E-commerce: a roadmap for finance and treasury, was supported by Deutsche Bank and presented on 28 April 2020.The next webinar in the Global Treasury Leaders series will be held on 19 May; the topic will be in-house banks and managing liquidity during a period of crisis, with panellists from Infosys and Roche.


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