How marketplaces can grow faster using the right payment technology.

The Sharing Economy Boom

Online marketplaces are named for their real-life counterparts – a single place you can visit and buy goods from a multitude of sellers. Being online means that a marketplace can be far bigger and offer far more variety than any offline market. It can offer virtual as well as physical goods. And it can sell goods both home-made and from big name brands.

Marketplaces aren’t confined to retail either. Deliveroo in the takeaway sector is a marketplace, Uber in travel is also a marketplace. Marketplaces serve to corral and structure the wide array of choice the internet can offer. And the model of connecting buyers and sellers in this way has become a phenomenon. These marketplaces are experiencing extraordinary growth. E-commerce sales are expected to grow to $4 trillion worldwide by 2020, and 40% of these sales will be through marketplaces.

Payment Challenges

This growth is part of a general trend: the booming sharing economy. Consumers have undergone a huge shift in behaviour and preferences that marketplaces of all sorts are well positioned to take advantage of — consumers want a single place to buy from multiple sellers, not just a single brand, especially those who are browsing on a mobile. We’re not only seeing new marketplaces, but established retailers shift towards the marketplace model.

But these new or pivoting businesses need different payment solutions for this business model to thrive, thanks to the specific challenges that these marketplaces face. The simple buyer-and-seller relationship that an e-commerce business typically has is now much more complex. Marketplaces have a two-sided business model, where they act as a middle man between buyers and sellers. Marketplaces have all of the same challenges as other online stores, such as the number of different methods accepted, currency conversion, and ensuring a good experience, but they also have additional challenges.

They need to have a slick pay-out process to keep sellers engaged and loyal. Payments need to be split correctly where a single checkout involves multiple sellers. And they face types of fraud unique to the sector such as collusion fraud where fake buyers and fake sellers work together to facilitate the sale of non-existent goods and services or using stolen credit cards.

Marketplaces need to onboard sellers, a process that has the potential to be highly manual and time-consuming. This process needs to be compliant with the latest customer due diligence regulations, including obtaining all the right documentation. The regulation issues don’t stop there — under new PSD2 rules, any intermediary handling funds between a seller and a buyer needs a payment institution license. Obtaining this license is no small task, and the penalty for non-compliance is significant.

With buyers and sellers flocking to online marketplaces, these businesses need to focus on providing a compelling experience for both parties and identifying new areas for growth. Payment challenges can impair these ambitions. Furthermore, the level of complexity, especially the need to acquire a payment institution license, is difficult for the business to handle on its own. To address complexity, while maintaining business focus, requires marketplaces to outsource their payments. But is the right technology available?

New Technology for New Challenges

As they step into the marketplace era, this sharing economy business model demands a new approach to payments. Money flow is shifting from one-to-many to many-to-many. Dealing with this new model and meeting these needs means engaging a payment partner as innovative as the businesses they plan to support.

Marketplaces need a payment partner that can assist them with regulatory compliance, provide seamless onboarding of sellers, maximise the conversion from browsers to buyers, manage payments — including holding the payment until the product or service is delivered — and paying out to sellers without delays or high fees.

The needs of marketplaces aren’t being met by many e-commerce payment providers, and growing e-commerce businesses need to focus on meeting their customers’ needs — both buyers and sellers. Without outsourcing to the right partner, marketplaces across Europe and beyond risk being constrained by existing systems, built for a simpler era of e-commerce.

But with the right partner, marketplaces can not only solve these issues, but enjoy additional benefits such as insight into customer payment patterns, decline recovery, and simple refunds to keep both sides of the marketplace happy.

To learn more about marketplace payments download this whitepaper.


SafeCharge Limited is an Electronic Money Institution authorised and regulated by the Central Bank of Cyprus and is a principal member of Mastercard, Visa and Unionpay International (CUP). SafeCharge Financial Services Limited is authorised and regulated by the Financial Conduct Authority as a Payment Institution. Both SafeCharge companies are wholly owned by SafeCharge International Group Limited.