Furthermore, the report also identifies solutions to address the specific needs of the marketplace business model, as it highlights that marketplaces face complex challenges that fintech systems do not currently address.
The core difference between traditional ecommerce merchants and marketplaces is in the relationship between buyers and sellers. Traditionally, there is one seller and many buyers. In the marketplace model, there are multiple sellers and multiple buyers, with each transaction involving three parties: the seller, the buyer and the marketplace. This difference creates complex challenges:
Regulation – The impending Payment Services Directive 2 regulation requires certain marketplaces which retain funds between a seller and a buyer to hold a payment institution license.
Seller Onboarding – Manual processes and Know Your Customer regulatory requirements create friction, which discourages sellers from registering with marketplaces.
Payment Checkout – A critical component for any business. Localisation, buyer experience, payment method offering, all must be optimised for conversion.
Split Payments – Marketplaces need to split transactions between multiple parties, both for marketplace commission and where a single checkout experience involves multiple sellers.
Seller Settlement – Marketplaces are in competition for sellers. Sellers demand frequent settlement of funds, often daily, in their local currency, and using a local payment method.
Unique Fraud – Marketplaces face new forms of fraud unique to the sector such as ‘collusion fraud’ where fake buyers and sellers facilitate the sale of non-existent goods with stolen payment cards.
The report is called ‘Marketplaces Best Practices for a Successful Payments Strategy’ and it is based on a series of interviews with industry experts and marketplaces.
Every day we send out a free e-mail with the most important headlines of the last 24 hours.
Subscribe now