The quest to acquire the broadest possible user data is driving e-commerce and technology firms into strange waters. Early last month, one of the world’s largest technology companies -- Apple -- announced that it was launching a credit card in association with Goldman Sachs. A few months earlier, e-commerce giant Amazon had entered into a similar partnership with ICICI Bank in India to launch a co-branded credit. Now, reports say that Indian e-commerce players like Flipkart and Ola are likely to follow suit.
The diversification of consumer-focused internet platforms into financial services might seem strange, but experts and analysts like Ankur Pahwa of Ernst & Young say it is “fairly intuitive and logical”. Such associations give these companies access to one of the most valuable resources in modern milieu: data on customer spending behaviour.
E-commerce firms and technology platforms already have some of the largest repositories of such information, which they use to offer personalised offers to their users. What venturing into hard financial products like credit cards does, however, is open the door to acquire and use a wider range of information that is not limited to just their own respective ecosystems. “If I have a credit card, I’m not going to restrict myself to spending on just one platform. This gives the company insight they did not previously have: customer spending behaviour outside their ecosystems,” adds Pahwa.
This insight is an invaluable resource because it enables them to maximise spending inside their own ecosystems. For instance, if someone purchases a holiday package on some other platform but uses this credit card, then the company can push associated products like travel insurance, car rentals etc from within its own, or its partners’, portfolios.
“Such products offer a platform for understanding user behaviour, which becomes a way to more effectively push your products to customers,” Anand Ramanathan, partner, Deloitte says. Pahwa adds that this increases customer retention by increasing spending inside platforms.
Ramanathan also notes that financial services have become an important part of the product proposition and branching out into the segment offers natural synergies companies can exploit. “You are reducing the total cost of ownership of your products with solutions like this, and therefore the number of people who can afford your product also goes up,” he points out. “Offering finance solutions is also one of the ways in which you are able stave off a potential customer being diverted to some other channel, thereby increasing the e-commerce pie itself,” he concludes.