Ernst van Niekerk, Founder and Chief Executive Officer at Payaut, offers insights into how being PSP-agnostic can benefit marketplaces.
What are the key factors to consider when building an online marketplace platform?
Growing an online marketplace platform relies on strategic planning and execution. Firstly, prioritising platform growth is important, which is why businesses should invest in scalability, user experience enhancements, and localisation. Furthermore, targeting international expansion broadens one’s reach, attracting both buyers and sellers globally.
Secondly, those building online marketplace platforms should streamline seller onboarding by customising requirements for each local market, thus simplifying processes while ensuring compliance with local regulations. Tailored support and resources ultimately facilitate optimised integration processes for sellers, enabling marketplace growth.
Lastly, businesses must diversify their payment methods offering to accommodate local preferences by incorporating widely used methods like Sofort, PayPal, and iDEAL. Accessibility to preferred payment channels enhances buyer satisfaction and trust – and increases conversion and retention for the platform.
In essence, marketplaces can successfully expand across international markets by focusing on platform growth, simplified seller onboarding, and offering a diverse range of payment methods.
Choosing a PSP comes with significant challenges for marketplaces. While many PSPs present themselves as the perfect solution, substantial differences exist regarding the offerings and capabilities they extend. A great example is that of the ‘all-in-one solutions’ providers that take care of payin processing, seller know your customer (KYC), and seller payout. Whilst it might seem convenient at first glance, working with only one provider can lead to the downside of being locked into a single PSP, limiting your flexibility and blocking your future growth.
Although not easy to spot in advance, adequate customer support from the PSP can solve operational hurdles and lead to quick issue resolutions – both of which impact marketplace efficiency. Taking some time to investigate the quality of customer support is necessary, as it can vary heavily amongst PSPs. Seller onboarding complexities also pose a challenge, as alternating verification processes and requirements across PSPs can cause delays and frustration for sellers, potentially decreasing conversion rates and slowing down marketplace expansion. Moreover, the availability of diverse payment methods is essential for catering to varied buyer preferences. However, not all PSPs offer all payment method options. Settling for a provider that offers limited options could result in lower buyer payment conversion.
Lastly, pricing fees play a pivotal role in the selection process. Hidden costs or unfavourable fee structures can erode profitability and competitiveness, underscoring the importance of carefully evaluating pricing models to ensure they align with your business objectives. When navigating these challenges, marketplaces should prioritise thorough research and due diligence to ensure they ultimately select a PSP that best suits their needs and fosters sustainable growth. While the option of using more than just one PSP might not seem interesting initially, it can hugely benefit future growth strategies.
Being a PSP-agnostic marketplace offers several advantages. By selecting the best PSP tailored to local requirements, platforms ensure compliance and an optimised user experience. Furthermore, automated reconciliation processes streamline financial operations, thus enhancing accuracy and transparency. Additionally, smooth seller onboarding, including KYC and know your business (KYB) verification checks, increases the chances of bringing the best sellers on board, enabling marketplace growth. If marketplace platforms are PSP-agnostic, they reduce the lock-in effect, which allows them to operate in a more democratic payment landscape. It enables flexibility to switch or add PSPs based on factors like pricing, conversion rates, support quality, payment method availability, and uptime, ensuring optimal performance and adaptability in a dynamic market environment. Furthermore, platforms can use a so-called payment orchestrator, which helps them redirect a payment request to the most optimal payment processor.
Being PSP-agnostic significantly helps in adopting local market requirements. It eliminates the need to onboard the same sellers for each PSP – or adjust integration and payment flows for every newly added payment method or PSP. This streamlines operations by saving time and resources while ensuring compliance with diverse regional regulations and preferences. Moreover, the unified approach simplifies reporting processes, as all settlements are reconciled into a single overview, hence reducing complexity and increasing accuracy. Automated splits further expedite the process, eliminating human errors and facilitating timely and transparent financial reporting. Solutions like Payaut can serve as a valuable partner in maintaining PSP agnosticism, offering a simplified approach to payment processing.
By embracing PSP-agnosticism, marketplaces can adapt to evolving market dynamics, incorporate new payment methods, and cater to diverse buyer preferences. This agility enhances the buyer and seller experience, strengthening market positioning by demonstrating responsiveness to local needs and regulations. By leveraging the above learnings, a marketplace can automate reconciliation processes, reduce human error, and accelerate the adoption of diverse payment methods, independent of a specific PSP, in a dynamic market environment.
This editorial piece was first published in The Paypers' Fintech for Marketplaces and Platforms Report 2024 which taps into the fast, ever-expanding ecommerce industry, being the ultimate source of information for businesses looking to expand and grow their consumer base.
Ernst van Niekerk is the founder and CEO of Payaut. Ernst has over 13 years of experience in online payments, having worked as a product manager for Adyen and gaming companies. With the mission to democratise the marketplace payments world, Ernst van Niekerk founded Payaut in 2019. Ernst van Niekerk has a MScBA and BsC in Business Administration from Rotterdam School of Management, Erasmus University.
Payaut helps online platforms and marketplaces accept and collect payments via any PSP for various currencies. Payaut handles the seller onboarding process, splitting payments and payouts through one API. As a PSP-agnostic payment solution, Payaut enables the marketplace to select payment providers based on the best prices per payment method and be compliant with EU regulations. Payaut democratises the payment ecosystem for marketplaces, allowing them to process through any PSP.
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