Marketplaces have gained a lot of attention in the last years and have increasingly become a popular way for ecommerce platforms to drive revenue. However, the complexities that come with this model should not be underestimated; payments for example, is one of the most critical aspects to get right when working on how to build and grow your marketplace platform.
The whole payments cycle can be a very complex headache for marketplace operators, but when designed and implemented correctly, it has the potential to be a real competitive differentiation and a fantastic revenue accelerator. Successful operators such as Amazon understood early on the importance of a smooth checkout and payment experience, which has resulted in so many third-party sellers choosing its platform to reach a wider audience.
Challenges arise at every step of the money flow: onboarding hundreds of different sellers as quickly as possible, offering the relevant payment methods, managing split payments, processing pay outs smoothly, and dealing with reconciliation in a timely and accurate manner, are all things that can make or break a marketplace. Thankfully, these challenges also offer opportunities to stand out when done right.
Inflexible payment systems will crimp growth potential and that is something you cannot afford.
How can you ensure your payment solution not only ticks all the boxes but also makes a significant impact to the bottom line? At Nuvei, where we work with marketplaces in all verticals: retail, consumer electronics, movies, books, gaming, NFTs etc., we address this question daily.
Here are five key areas to consider in order to have a winning payments solution for a successful marketplace:
Collecting and validating the required data of your sellers can be a challenge by their sheer number, and the fact of often having to onboard them simultaneously. Add to that the complexities of regulations per country and vertical, and the challenge can feel overwhelming. The standard approach of collecting the required data via emails or uploads will limit scalability. An automated process including APIs and AI-based logic wherever possible is imperative.
Digital-first KYC/ KYB that works at speed and scale helps sellers get up and running. The faster they sell, the more revenue they generate.
'Payment must be frictionless and support the overall user experience. You need to know your customer and offer relevant payment methods according to their needs,’ Mauro Stangalini from IBS.it, the largest online Italian bookstore said in our recent Marketplaces White Paper.
Most consumers already know what payment method they are going to use when making a purchase, so to ensure the completion of the transaction it is essential to offer a wide range of payment methods. Now, certain payment methods that work on standard ecommerce sites may have limitations in a marketplace ecosystem.
There will likely be many compatibility considerations to manage in terms of commercial and technical factors. The growth of Buy Now Pay Later payment flows for example, add an additional layer of complexity to address, a given customer can receive goods before they have been fully paid for, yet the seller in turn may require payment by the operator for those goods according to a schedule based on product shipment.
Customers expect to a make single payment for a mixed basket of goods or services, even if these are provided by different sellers. In the background however, the payment needs to be accurately split and settled to each seller via a complex process that can vary depending on the payment method used.
For example, this could include taking a single authorisation during checkout, and subsequently managing multiple payment captures, with the funds being paid into the digital wallets of each seller in an escrow account where they will be held until they are paid out to sellers.
When it comes to paying sellers, the process needs to be automated, robust, and simple. A successful marketplace is one which focuses as much on seller experience as well as buyer experience.
Before a seller is paid various conditions must be met, such as a service provided, or product delivered before funds can be allocated and transferred across accounts. You should ensure that your pay out solution is able to receive and transfer funds in a hassle-free way, and where required can do this across different borders and jurisdiction.
Ensuring timely payouts and billing cycles with automated fund transfers is an important part of delivering a good payment experience to sellers.
Marketplaces often have intricate payment terms, commission structures, shipping charges, returns policies, penalties, and other expenses. Add in taxes, listing costs, fulfillment, and logistic fees and it can all add up to a significant amount of frustration and friction, especially with cross-border ecommerce.
As in most businesses, data is key for successful operations. Access to a powerful reconciliation platform where you are able to track sales, refunds, chargebacks, commissions, and payouts on a timely basis will ensure that your accounting team can efficiently manage their financial operations.
Today’s marketplaces are predominantly focused on B2C, but we are seeing an important increase in B2B initiatives, from procurement platforms to wholesale retail. This again opens up more revenue opportunities but in turn brings an additional layer of complexities and capability requirements critical to its success. These include white-label invoicing, provision of trade credit, and seller financing. Also, new business models are emerging to better support B2B requirements such as One Creditor.
In Nuvei, accelerating our customer business is not only our mission but an obsession. We will continue to work alongside our customers and partners to ensure their marketplace solutions are optimised for success.
Jacqueline Ulrich, Nuvei’s Senior Vice President of Global Partnerships, joined the company in 2021. Jacqueline is responsible for all partnership strategies within Nuvei’s digital payments division, from marketplaces and ecommerce platforms to ISOs and PayFacs. She also amplifies Nuvei’s visibility and brand via the payments’ global ecosystem and opens up global commercial opportunities via partner integrations.
Nuvei is the Canadian fintech company accelerating the business of clients around the world. Nuvei’s modular, flexible, and scalable technology allows leading companies to accept next-gen payments, offer all payout options and benefit from card issuing, banking, risk, and fraud management services. Connecting businesses to their customers in more than 200 markets, with local acquiring in 45+ markets, 150 currencies and more than 580 alternative payment methods, Nuvei provides the technology and insights for customers and partners to succeed locally and globally with one integration.
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