Before Netscape’s 1995 IPO, CEO Jim Barksdale stated, “There are only two ways to make money in business: one is to bundle; the other is to unbundle”. More than 25 years later, the online checkout process is unbundling from the e-commerce platforms. Amazon created the standard of immediate checkout, and held a patent on one-click technology until 2017. While it still holds the “1-Click” trademark, other companies are now emerging to ‘democratise’ e-commerce by giving smaller retailers the same tools for maximising conversion rate as the major players.
‘Big tech’ has already built checkout alternatives such as Apple Pay, Google Pay, and PayPal, but these digital wallets operate as an alternative to the core checkout flow and therefore only capture a small number of buyers. It is new startups such as Bolt and Fast that have emerged as leaders in the one-click revolution, with solutions that take over the core checkout experience and fully manage it for merchants. They are also part of a larger evolution than just removing barriers from the payment process, and can be viewed as an identity layer for your entire online shopping experience.
The Problem With Checkouts
With e-commerce use increasing, customers punish a tedious checkout process with their impatience only increasing on smaller screens. Mobile e-commerce sales grew as a share of total e-commerce sales from 52% in 2016 to 73% in 2021, with mobile cart abandonment rates at 86%, compared to 73% on desktop. Additionally, potential buyers frequently turn away from a purchase if they need to create an account or login, with 1 in 3 online shopping carts being abandoned because the user forgot their password. Customers also want flexibility with their payment options, as demonstrated by 10m Brits avoiding any retailer not offering Buy Now, Pay Later (BNPL) options.
Aside from conversion rates, the death of third-party cookies makes the checkout process increasingly important for the purpose of gathering first-party customer data. Customer relationship management (CRM) is made infinitely more difficult without user details, and 91% of consumers are more likely to shop with brands who they recognize, remember, and which provide them with relevant offers. Many larger companies are in turn building their own payment systems to own more of the customer data, but a wealth of options already exist to outsource this stage and reduce operational complexity.
A third consideration for online merchants is fraud prevention, as overall e-commerce fraud is projected to rise by 18% during 2021 to over $20 billion. Given that around 30% retail sales in the UK alone are now made online, the online checkout process is not an area which can be ignored.
The Checkout Landscape
The online checkout and payments process has already given birth to fintech giants in the recent past, which demonstrates the importance of this stage of the shopping experience for both customers and merchants alike. Stripe is worth nearly $100 billion, making it the most valuable private business in Silicon Valley. While still closely tied to the checkout process, Stripe differs from Bolt and Fast as it is primarily payment processing software and e-commerce APIs for developers.
Checkout.com wears the crown of Europe’s top unicorn, valued at $15 billion. However, it is also not a direct competitor, instead offering technology to help companies accept payments worldwide through a single integration. Shopify’s Shop Pay has so far been limited by design to merchants using its eponymous e-commerce platform, but in 2021 has expanded by offering Shop Pay to all Shopify merchants selling on Facebook and Instagram. The checkout landscape is lucrative, but also ripe for fresh opportunities.
The New Challengers
The two main players in the one-click revolution are US startups Bolt and Fast, founded in 2014 and 2019 respectively. Both work on a similar premise; fully managing the entire checkout process for merchant partners and can be integrated with e-commerce platforms including Shopify, Magento, and BigCommerce. The first time they encounter the platform, a customer creates their account as normal, inputting shipping, billing and flexible payment preferences. Each time thereafter, the customer is recognised as a returning customer even on websites they’ve never visited, with all their information saved to enable a one-click checkout. Account creation with merchants is also simplified, meaning not only do conversion rates increase, but retailers enjoy the top-of-funnel benefits such as greater tracking, communication, and customer loyalty. Bolt and Fast take a cut on each payment processed, with Bolt also charging for its other services – such as fraud prevention – on a SaaS basis, making it a hybrid payments-and-software company.
In terms of growth in the one-click checkout space, both Bolt and Fast have been funded to scale quickly: Bolt raised $393 million in October, bringing their total funding to over $600 million and valuing it at $6 billion. Fast has raised $125 million in its shorter existence, at a valuation of more than $1 billion. Smaller players include PeachPay, which was founded just this year by US college grads and has raised pre-seed funding from WordPress creator Automattic. PeachPay allows customers to buy from any of the product and cart pages, a vision similar to Bolt’s of allowing payment wherever content is first discovered. Another company worth mentioning is Pass, a Nigerian startup which raised $1 million at pre-seed phase with the intention of becoming the “Fast for Africa”.
It is clear that these companies are on their way to successfully tackling the checkout problem. Bolt makes impressive claims about its impact, observing a 75% conversion rate increase, 39% repurchase, and 23% increase in AOV for merchants using their product. It also claims a 25% increase in account creation for its merchants- an essential step in building effective CRM capabilities.
With access to customer data increasing in importance, a speedy checkout process will not be the end of the road for the one-click-checkout gang. Fast CEO Domm Holland has spoken about the company being an “identity API”, acting as a source of expansive shopping preferences and personal data. In positioning itself in this way, Fast will have to contend with potential e-commerce clients becoming increasingly protective and insular with the data they hold on customers.
Should Merchants Build or Buy?
Should every online retailer just partner with a one-click provider and call it a day? Merchants could build their own checkout technology – if they have the resources – but this is a significant cost to develop and then maintain. However, the exclusive control over customer data may prove worthwhile for those who could afford it. The largest retailers and conglomerates of brands may choose to do so. But for now, many companies are happy to concede some control in order to have an optimised checkout experience for their customers. Bolt has managed to partner with the Authentic Brands Group, which includes Forever 21, and has just expanded to Europe this month with a deal with LVMH brand Benefit Cosmetics. In similar fashion, Fast recently expanded to the UK with Revolution Beauty, a publicly traded global mass beauty and personal care business. It is clear that demand in the market will allow for multiple checkout providers to successfully scale and build partnerships with merchants and brands. E-retailers will have to make a build-or-buy decision given the evolution in checkout expectations, but one thing is certain: no online merchant can afford to abandon the checkout experience for their customers in 2021.