Online marketplaces make up two-thirds of global ecommerce sales. Their rapid expansion has revolutionised the way we shop, sell, and conduct business globally. A critical aspect of their operation is a tailored payment processing system, designed to match the specific payment preferences of each local market, a pivotal strategy for international expansion.
To understand the critical role of global payment acceptance in marketplaces, it is important to first examine what sets these platforms apart from other ecommerce models:
Onboarding and underwriting: Marketplaces excel in streamlining the complex processes of vendor onboarding and underwriting. By enabling a rapid, efficient, and risk-assessed onboarding process, marketplaces facilitate a swift market entry for new sellers, all while maintaining a secure environment for consumers.
Payment processing: At the heart of every marketplace is its ability to process payments for both buyers and sellers, which encompasses the capability to accept diverse payment methods, split payments, and handle payouts, all while minimising fraud.
Billing and funding: Marketplaces manage intricate billing and funding cycles, ensuring that all financial transactions are seamlessly conducted, sellers are compensated promptly, and buyers are billed accurately.
Reporting and back-office: Data is the new oil for marketplace operators, so ensuring these platforms have seamless reporting and back-office operations allows for better insights into seller performance, customer behaviour, and operational efficiency.
Within this backdrop, payment processing emerges not just as a logistical necessity, but as a strategic cornerstone for marketplaces aiming to carve a niche in the global market.
For marketplaces, the challenge of global expansion is twofold: navigating the complex regulatory landscapes of different regions and catering to the diverse payment preferences of a global customer base. In this context, global payment acceptance is essential to delivering a tailored payment experience that resonates with local customs and behaviours.
Despite the recent decline in the popularity of cards, the integration of direct card-acquiring capabilities remains crucial for marketplaces, especially in cross-border transactions. Local acquiring is significant in this context, optimising acceptance rates by processing payments in the purchaser’s region.
However, marketplaces cannot rely solely on cards when expanding into multiple geographies.
In international ecommerce, alternative payment methods (APMs) are not just alternatives but essential components that ensure inclusivity and preference in payment options. Marketplaces, with their diverse consumer bases, must integrate a variety of APMs to cater to regional preferences and ensure a frictionless payment experience. Some key APM categories that will vary in popularity and usage across different markets are:
Direct debits: Often used for recurring transactions, direct debits like ACH payments in the US, EFT in Canada, and SEPA payments in Europe are ideal for subscription-based services within marketplaces (e.g., a monthly subscription for Amazon Prime).
Bank transfers: These allow consumers to transfer funds directly to marketplaces – a preferred method in regions like Europe, in line with the PSD2 Open Banking initiative, and countries with established systems, like iDEAL in the Netherlands or giropay in Germany.
Digital wallets: In 2023, digital wallets, including mobile money, accounted for approximately 50% of the global transaction value in ecommerce. In Asia, for example, Alipay and WeChat Pay dominate the market, while PayPal is widespread in over 200 countries and regions. Marketplaces integrating these wallets simplify transactions for users who prefer not to enter card details for each purchase and capitalise on the wallet providers’ security measures.
Buy Now, Pay Later (BNPL): BNPL options are revolutionising the payment space by allowing consumers to spread the cost of a purchase over time. For marketplaces, offering BNPL means appealing to budget-conscious consumers and those who prefer not to use traditional credit.
Offline payments: Offline payments remain relevant in regions with lower credit card penetration or where consumers are wary of online transactions. They allow marketplaces to extend their reach to consumers who prefer or rely on cash-based transactions.
Integrating diverse APMs into their systems enables marketplaces to cater to the unique needs and preferences of a global audience. The importance of partnering with a payment provider like Nuvei, which can offer a broad range of payment options, is highlighted by the success of OnBuy, the fastest-growing marketplace in Europe. Through its collaboration with Nuvei, OnBuy diversified its payment methods and saw a 35% increase in revenue and a 13% improvement in acceptance rates.
To conclude, marketplaces are reshaping global ecommerce by effectively combining diverse sellers and buyers on a unified platform. Their growth hinges on customised, region-specific payment systems that are vital for tapping into international markets. Apart from transactional efficiency, this is about crafting a user experience that resonates worldwide. Successful global expansion thus relies heavily on collaborating with payment providers who can navigate the varied landscape of global commerce, ensuring marketplaces can increase their revenue potential while fostering long-term growth.
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.
Samuel Igbinadolor, who became Nuvei's Head of Marketplaces and Platforms Partnerships in 2022, oversees developing strategies and fostering collaborations with global marketplace platforms. In addition, he enhances Nuvei's prominence and reputation by facilitating international business prospects through collaborations with partners.
About Nuvei
Nuvei is a Canadian fintech company accelerating the business of clients around the world. Nuvei’s technology allows companies to accept next-gen payments, and benefit from card issuing, banking, and risk and fraud management services. Connecting businesses to their customers in more than 200 markets, with local acquiring in 50 markets, 150 currencies, and 680 APMs, Nuvei provides the technology and insights for customers and partners to succeed locally and globally with one integration.
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