Gaining scale as a marketplace is, by-and-large, a good thing.
It’s a sign that one has successfully found a way to reach a stable base audience with its goods or services to such an extent that it is time to think about expanding that footprint.
However, as marketplaces start gaining scale, their thoughts turn to the global marketplace and how to expand fully into it, said Yapstone Executive Vice President and Chief Product and Technology Officer Sanjay Saraf to Karen Webster in a recent conversation. And that, he said, comes with an enormous number of challenges — some obvious, some not.
Marketplaces, naturally, understand that they have to adapt their products and services to the needs of a global, yet often very local, market. What they need to think about more, however, is the payments journey that supports the commerce experience. Specifically, he noted, they need to know how to make payments adequately accessible for customers on the front end, smooth on the backend, secure and compliant with local regulations.
However, that is only about bringing the experience up to par and being managed — the necessary table stakes of building a complete payment experience.
“For marketplaces, what we are seeing is they are quickly evolving from just offering basic payments services and enabling of transactions,” Saraf said. “The ones that are really growing quickly are looking at payments and asking, ‘How can we use these to engage sellers and buyers more efficiently so we can increase the total transaction of goods and services?’”
The power of getting beyond the basics, he noted, can unlock a host of revenue-driving capabilities for marketplaces, and the challenge for them is knowing the right paths to take.
How to Grow Global Marketplaces
For a customer on a platform, Saraf noted, it is hard to overstate the importance of seeing the right local method out front and being ready to use when it comes time to pay. Moreover, those methods, he noted, can be very local and quite specific.
In a market like Brazil, he noted, most consumers don’t carry cards issued by global card brands. Chinese consumers use QR code-based systems like Alipay and WeChat Pay. Customers from the Netherlands are so dedicated to the IDEAL mobile wallet that if they can’t pay with it, most of the time, they won’t be paying at all.
“If they aren’t offered IDEAL as a payment method, the stats are clear: You are going to lose 60 percent of the traffic from the Netherlands,” Saraf said. “To enter into any new market, marketplaces have to be aware of the preferences of the consumers — even though making those preferences available to them can be a tricky problem.”
Ultimately to provide it on the front end, it must be integrated on the backend, which is why the first and foremost rule of marketplace expansion, for the marketplace or its payment services provider, is to have all the necessary optimizations tightly integrated and fully optimized. The customer doesn’t need to see every possible payment method under the sun — they need to see the right one. If it’s not there or not easy to access, one is switching off a large section of the addressable market.
However, offering it isn’t enough, of course; it must be secure, which is why the second big area of interest when going international as a marketplace is understanding how one’s fraud-management approach must fundamentally shift.
“This is not about just taking the fraud engine you have and using it elsewhere, no matter how robust it is, it should be customized to its new market,” Saraf said. “The right question is how to augment the platform with the right local data sources that supplement the algorithms and existing AI models. Generic rules will not apply or serve you well when you are in a completely different market with different on-the-ground conditions.”
Those conditions, he noted, really lead to the last significant area of payments challenges to fully take on as a marketplace: Considering expanding and processing transactions on a global scale between anonymous buyers and suppliers — being a local entity.
“This is where payment services providers can really be important in adding value because setting up relationships with local entities is challenging and a real-time consumer,” Saraf noted, adding that those local conditions can facilitate local issuing, processing and payouts so that every transaction isn’t incurring hefty cross-border fees.
Those are three significant and complex areas, Saraf noted, and clearing them is not a feat to be taken lightly. However, as they are being handled, and more players in the field can live up to that standard — the next generation of services and expansions can start to permeate the marketplace.
Operating in an Expanded Marketplace of Trust
Trust, Saraf noted, is the magic that makes marketplaces work — and it is the hardest thing to provide for when the buyers and sellers are strangers to each other, possibly operating on opposite sides of the world.
Moreover, the types of goods and services being transacted on marketplaces, he noted, are getting ever more diverse. A customer in the U.S. might be renting a property sight-unseen in Thailand for a vacation six months away. A property owner of a luxury condominium in New York must trust that the renters they’ve never met before aren’t going to trash the place. Resale eCommerce marketplaces must be able to guarantee the luxury and designer goods they say they are selling are the real thing — and in the condition in which they were represented as being in when sold.
So, there aren’t any silver-bullet solutions. There are, instead, ways to manage risk — by using, for example, a very robust onboarding process for sellers so it is well defined who they are, how long they’ve been in business and their track record. Moreover, Saraf said, it’s important to realize that the vetting process is not a single flash-in-time event; it is an ongoing process throughout the life of a seller.
“Even a seller that has been working on a platform for a long time, if we start seeing the number of chargebacks, or fraud claims, or disputes rapidly go up — that is something we are going to monitor and intervene to understand better,” he said.
In places like consignment ecosystems, he noted, it is often a matter of going through all the additional steps that go into an onboarding process — and finding the places to go a few steps further in terms of vetting. That means, for example, building scores for sellers and monitoring them over time to maintain that this is a person who can be trusted to provide the goods and services they are offering.
“On the payouts side, it is about having a lot of logic in your platform — and really understanding a supplier based on their history, prior feedback and a number of other data points that will guide how they are paid,” he said. “In some cases, that might mean funds need to be held in escrow until a customer takes delivery and offers final verification of the goods. Or we might find their management is so excellent in terms of their goods, we might offer to make an advanced payment before the good is ever received and be able to charge a small fee for it.”
The goal, he noted, is in building an ecosystem that is secure and informed enough that both buyers and sellers want to transact on the marketplace with fair confidence that the people they are dealing with have all been verified, and that on the off-chance things still go wrong, they are protected. Once that is in place, he noted, those processes can be further refined to better engage sellers and attract buyers.
That could mean building more tiered onboarding processes — something Yapstone realized when it saw how many potential property owners were bailing out of listing their properties because of the multiple pages of forms and data pieces they needed to get it done. Making it possible to get started with a name, property and email address, Saraf noted, and making the rest of the data necessary when an actual booking is on the line, is a much more effective way to bring sellers to a platform.
Alternately, he noted, it might mean offering things like installment payments for customers — which can boost basket size only by making it easy to spread out a payment.
“What we are seeing is that payments aren’t just a way to help consumers finish a transaction,” he said. “What marketplaces can do is really begin to use payments as a tool to shape and expand them.”