The term ‘marketplace’ might once have conjured up images of quaint cobbled streets and Oliver Twist-style street sellers. However today these clusters of vendors are no longer under awnings, but aggregated under the umbrella of an online platform.
Fast fashion and retail sites, such as ASOS, Amazon and eBay were among the first to introduce this new model, embracing the online boom of the late 90s to early noughties. Since then, factors including the soaring uptake in smartphones and increased consumer demand for instant access to products and services has seen the digital marketplace model exploding into every imaginable sector.
Moving beyond products, digital marketplaces are fast becoming synonymous with aggregated services. Sites such as Skyscanner and lastminute.com fall into the latter category, providing a platform for hoteliers, airlines and tour operators to list their latest offering. It isn’t just about online travel, however. Social media platform Tribe has just this month secured a $5 million series A investment to fund its online marketplace, which enables registered ‘social media influencers’ to make social posts on behalf of brands, in exchange for payment.
As the model moves into ever more unconventional market segments, it is precisely this payment part of the transaction that becomes increasingly complex to manage. Online services can easily be provided to purchasers from all over the world, which brings the need for international payment flows in multiple currencies between multiple merchants and buyers. What’s more, as marketplaces increasingly move towards the distribution of people’s time and services, payments will need to fit around various models, depending on whether the service provider needs to be invoiced by hour, day, or week. Relying on traditional financial service providers to process these funds is simply not viable for a marketplace looking to grow in this competitive space. Merchants and vendors do not want to have to wait for up to 90 days to get paid for an hour’s work or renting out their property for one night.
While the user is presented with an entirely digital experience, marketplaces that rely on traditional financial services require a host of manual processes in the background. Manual entry brings increased risk of errors and subsequent costs to rectify, not to mention the staff resource required to manually set up merchants one by one, on a platform that can have thousands of active sellers at any one time. Many traditional providers will readily admit that their processes and fees on each side of the transaction don’t fit in with a business model that relies on speed of transaction and seamless user experiences.
Meanwhile, as a marketplace looks to launch into new international markets, working with a traditional financial services provider would require the enterprise to set up new local banking networks on a country by country basis. This process can take months and significant investment to achieve- neither of which fit with the model’s requirement to scale at pace.
It’s for this reason that online marketplaces have embraced smart payment APIs in a big way. Built by developers, for developers, the technology can be integrated into the marketplace to allow automated international payments. Moreover, by removing the pain associated with building local payment networks to accommodate payments across borders, companies such as Skyscanner, lastminute.com and Evaneos-travel.com are able to focus on offering the best travel experiences to customers anywhere in the world
We’re now able to book our flights, reserve accommodation, let our homes, sell our time and even our tweets online. Who knows where online marketplaces will take us next. Removing the friction and inefficiencies that usually get in the way of moving money around the world is key to enabling this model to reach its full potential – whatever that might be.