Voice of the Industry

Payouts have never mattered more to marketplaces

Thursday 16 February 2023 08:05 CET | Editor: Irina Ionescu | Voice of the industry

The dynamics of the digital economy are changing. Marketplaces’ success hinges upon providing the optimum payment experience for both buyers and sellers. Yael Barak, VP of Product at Checkout.com, shares her take on digital payments in the new world of marketplaces.

The first iteration of an ecommerce marketplace arrived in the 1980s. It evolved organically from the Internet discussion forum Usenet (a distributed network connecting early Internet users across the globe) and soon became utilised by buyers and sellers attempting to transact.

But digital payments were somewhere on the spectrum of clunky to non-existent and growing pains ensued: the Usenet Marketplace FAQs highlighted that ‘it is your job, whether buyer or seller, to catch any problems as early as possible.’ 

Today, not only do we see a thriving online economy, many of whose biggest consumer brands are marketplace platforms, but these platforms now operate in such a fiercely competitive space that their success hinges upon providing the optimum payment experience for both buyers and sellers, without exception. The art of the marketplace is one of symmetry: no buyers without sellers and vice versa.

By 2025, analysts predict that up to 70% of all ecommerce transactions will be on marketplace platforms. Research already shows that three in five people cite marketplaces as their preferred shopping channel.  The marketplace momentum is apparent, but what is driving it and what are the payment challenges these businesses might face as competition heats up further?

Who's getting the economic and experiential value?

The value to consumers of today’s marketplace platforms, whether they offer taxi rides, holidays, groceries, or gifts, is both economic and experiential. Shoppers can quickly compare a multitude of products and costs, while enjoying the ease and convenience of an end-to-end service which is fast, safe, and fun. Key to this is the fact that consumers can make secure, frictionless payments. They can do so using local payment methods, local currencies, and through technologies such as Buy Now, Pay Later or digital wallets.

But that same expectation of economic and experiential value and choice is also true of sellers. Marketplaces live and die by their ability to offer optimal value to sellers who can and vote with their feet. Yet the quality of choice, particularly when it comes to the way sellers are paid, known as ‘payouts’, remains patchy at best.

If insufficient digital payments infrastructure undermined the early Usenet Marketplace, today’s commercial marketplaces know that transactional trust remains vital to their business models. The technology may have advanced radically, but its frontiers will always be where success is won or lost.  And it is not enough to only delight one side of your market. As payments technology emerges, allowing marketplaces to tailor the way their sellers are paid, this will be the new competitive battleground on which platforms strive for supremacy.

Unlocking the gateway to economic opportunity

Marketplace payouts have never mattered more. Households are under pressure, and the dynamics of the digital economy are changing. According to McKinsey, 36% of employed respondents are independent or gig economy workers.  The authors point out that because gig work doesn’t fit neatly into traditional labour statistics, it remains an under-examined part of the economy.

Checkout.com’s survey of 3,000 18 to 40 year olds in the US highlights how gamers and content creators (accounting for more than half of that population) are also monetising via a plethora of media platforms.

As the cost of living increases and inflation continues to outpace wage growth, the number of people selling things on marketplaces has increased by 200% since 2020, and 17% of consumers are planning to ramp up their marketplace sales activity to supplement their incomes. At the same time, research published by eBay suggests that the average American household has USD 4,000 worth of goods they would be willing to sell online, if necessary.  

Whether it's the gig, sharing, content or reselling economies, marketplaces will underpin a growing number of people and households - or ‘microentrepreneurs’ - in search of much needed cash flow.

Better payouts will be a game changer for us all

This highly coveted cash-flow remains elusive for many. According to a recent study, only 12% of  gig workers consider themselves financially secure, while 77% suffer periods without access to cash. Similarly, 74% of marketplaces say that faster disbursements to sellers represents a matter of competitive significance, and 65% say that neither they, nor many of their competitors, offer real-time payouts.  

Payments are a matter of socio-economic importance as well as a competitive imperative for marketplaces. Payments providers can help marketplaces to attract and retain sellers by onboarding them quickly and easily and then allowing them to be paid as often and as quickly as they choose with daily, weekly, or monthly payouts, or ad-hoc payments triggered by the accrual of a set balance by the seller.

Leading platforms will also need payments partners to help navigate new regulations and cut FX fees by delivering payouts in the sellers’ preferred currencies. They’ll also use their improved cash flow visibility to make better billing model decisions at all times, while keeping sellers and workers onboard by iterating better deals.

Platforms who utilise this kind of technology, by working with the appropriate payments provider, can deliver greater control over cash-flow. With 62% of sellers pivoting away from their existing marketplaces to a platform which offers real-time payouts, the competitive significance of this technology to marketplaces is explosive.

Great technology needs its north star

According to McKinsey’s study, microentrepreneurs are the workers who currently feel most optimistic about their personal economic futures, despite the challenges they encounter. The optimism comes from the sense of freedom, flexibility, and autonomy, which is often seen as a pull-factor for the gig-economy. The long-term opportunity for marketplaces to keep providing more value and retain sellers will be in providing evermore personalised and empowering, financial products such as cash management tools, virtual accounts, card issuing, or insurtech.

Marketplace platforms are built on technologies which enable their communities to thrive in the digital economy. Payments must enable them to navigate the future.


About Yael Barak

Yael has been building and deploying global payments solutions for the last 15 years. She’s worked with businesses around the world helping optimise the payment experience in verticals such as Ecommerce, Omnichannel Retail, Digital Goods, and Subscription platforms. A Product Manager at heart, Yael is obsessed with customer experience and customer-centric solutions. At Checkout.com, Yael covers such segments as Payment Facilitators, Marketplaces, Payout Solutions, and Developer Experience.

About Checkout.com

Checkout.com is a global payments solution provider that helps businesses and their communities thrive in the digital economy. Purpose-built with performance, scalability and speed in mind, our modular payments platform is ideal for enterprise businesses looking to seamlessly integrate better payment solutions. With a global team spread across 19 offices worldwide, we offer innovative solutions that flex to your needs, valuable insights that help you get smart about your payments’ performance, and expertise you can count on as you navigate the complexities of an ever-shifting world. Find out more at www.checkout.com.

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Keywords: marketplace, online payments, ecommerce, digital payments, online shopping, online platform, payment methods, local payment method, BNPL, instalment payments, digital wallet, e-wallet, gig economy, cash, cash flow, payout, real-time payments, FX , digital onboarding, Virtual IBAN
Categories: Payments & Commerce
Companies: Checkout.com
Countries: World
This article is part of category

Payments & Commerce


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