Marketplaces, internalisation, B2B: vision and objectives

This editorial was first published in our Online Payments and Ecommerce Market Guide launched on 1 November 2017. The guide features several important thought leadership editorials from ecommerce and payments industry professionals, which makes it a top-reference source for anyone involved in the payments ecosystem.

The ecommerce competition landscape has changed dramatically over the past few years. No single market dominates global ecommerce because each market is, simultaneously, global and local. Nowadays, commerce requires every brand to increase their international exposure and their offers accordingly. Every niche market is today concerned with taking its piece of cake. Online marketplaces have established themselves as the new benchmark for distribution models. They boost sales, enrich product catalogues, reduce costs, and are likely to take over 39% of the retail market share within three years (E-Commerce Foundation).

For example, eMarketer announced that the B2C online market is projected to exceed USD 4,000 billion by 2020. Similarly, Accenture and Alibaba Group estimate, in a new study, that marketplaces are expected to reach USD 1 trillion worldwide by 2020. The marketplace phenomenon is undoubtedly fuelled by consumer and organisations’ demand for best possible prices and larger choice.

Marketplaces are not just about globalisation

Going global leads to a fundamental change in the way companies do business. In the early days of ecommerce, going international mainly meant selling its own products in neighbouring countries. In our global and digital world, it means being able to sell products and services from anywhere in the world to customers all around the world via local and international payment methods, while being compliant with native regulatory. If we look closer at a marketplace, we come to realise that it is not only expanding sales channels or consumer outreach; it changes drastically underlying business processes such as vendor sourcing, payment management, revenue generation and others.

B2B marketplaces, a new trend

Starting from this observation, the marketplace way has become a must. More and more B2B players, in different industries, have shifted silently to this business model. Why? Sales between businesses are going digital. B2B digital orders have grown by over 30% in the last few months; e-invoicing is becoming the standard. Europe has issued 1.2 billion electronic invoices in 2015! In short, everywhere the commerce is becoming faster and simpler. Therefore, processes, support tools, and payment methods need to be adapted to the specific B2B issues. As an example, the SEPA payment method, available in 32 countries in the Single Euro Payments Area, streamlines payments between companies.

Understanding marketplace challenges

Because they are digital, marketplaces can be built to buy and sell almost anything, from second-hand children clothes to industry-specific parts or components. In the B2C and B2B world, the wide-spreading marketplace business model is not only seen as a sales expansion opportunity, but also as a powerful tool for procurement optimization. From a buyers perspective, marketplaces help strengthen his relationship with a larger number of suppliers at a smaller cost and effort. In very specific industry sectors, large players may also use marketplaces to fuel a shared supply chain services strategy, allowing their industry ecosystem to benefit from their buying power.

One of the main challenges of the marketplace business model has to do with payment management. Not only are payments directly related to revenue generation, but they also are the area where processes have changed the most compared to previous ecommerce organisations.

Key steps for efficient payment management in a changing and complex environment

From a payment management perspective, going global requires an extended ability to collect customer payments around the world in multiple currencies, from different locations, languages, time zones and dealing with technical interoperability constraints and financial tracking issues. The real-time transaction based on a payment management approach inherited from early days of ecommerce is no longer valid. A new breadth of solutions, as well as new financial skills within organizations, are needed. In addition to that, companies setting up a marketplace will need to face up to an evolving regulation framework, as national regulators have started picking up the topic, coming up with new regulations such as PSD2 in Europe which will come in effect in 2018.

Briefly, PSD2 aims to enhance transaction and banking data security, and to contribute to a better transparency against fraud and money laundering, while achieving further financial market opening and payment services digitalization. This has, however, sounding consequences on marketplace operations and should be carefully reviewed by any company looking at implementing a marketplace business model. With PSD2, a marketplace that accepts and handles funds from buyers to sellers must register to the Financial Prudential Authority as a Third Party Provider (TPP).

The marketplace business model defines the new ways of doing business globally while dealing with local constraints. In this new world, everyone understands that each transaction is specific and that the bulk transaction management approach is no longer valid. In addition to that, the upcoming regulation reinforces the need for controls as much as it facilitates the opening of the payment services market to newcomers. As the number of payment methods is constantly growing, as the regulatory framework requires even more interconnections between payment stakeholders, running efficiently a marketplace requires taking the payment management infrastructure a step further.

The move towards an intelligent payment management approach per transaction has just begun. The growth of digital payment methods fuels a constant acceleration of transactions bringing new challenges: less time to conduct fraud and money-laundering checks or to perform rules based on reconciliation and routing. On top of that, these systems must deliver24/7 availability and include even more risk mitigation processes.

About Christophe Bourbier

Christophe is a born entrepreneur and an executive with over 15 years of experience in competitive and disruptive strategy. Competitor at heart, captivated by international affairs, Christophe, before he founded Limonetik in 2007, had created different companies in High Tech and Communications.

About Limonetik

As an online enriched payment platform (PaaS), Limonetik provides a unique one-stop shop payment solution that connects international payment methods to marketplaces and merchants directly or through its PSPs. Limonetik delivers advanced services from collection and settlement management to reconciliation. Limonetik is the guarantee of regulation compliance.