Global eCommerce sales are predicted to grow by more than half over the next four years, with a projected value of $8.1 trillion by 2026. Scaling upward, however, remains a challenge for most online businesses, with more than 90% of eCommerce merchants earning less than $1 million in annual revenue.
Online marketplaces, or merchant aggregators, serve a vital role in eCommerce, helping small businesses from retailers to restaurants by exposing merchants’ products to a wider audience. eCommerce marketplaces have been booming since the pandemic’s onset, with online marketplace sales comprising 67% of global eCommerce in 2021. Consumers spent a total of $3.23 trillion last year on the top 100 marketplaces, such as Amazon and eBay.
Meeting the marketplace opportunity is no mean feat for platforms, however. One of aggregators’ most essential functions is to provide their merchants with everything they need to operate in a digital-first world, beginning with — and revolving around — payments. To scale and compete in global markets themselves, aggregators must be ready to offer a broad menu of payment gateways and processors to accommodate merchants of every stripe.
Platforms’ Problem of Scale
Problems of scale affect not only individual merchants but also the platforms on which they sell. International payments are particularly difficult for aggregators, as they involve not merely multiple payment systems and processors — many of them highly localized — but also the challenge of transacting across borders. The average merchant in the Asia-Pacific region, for example, generates 42% of its revenue internationally, making it crucial to offer these businesses their preferred payment gateways for cross-border as well as domestic transactions.
Providing merchants with their preferred payment solutions is a must for aggregators, but attempting to build integrations to the growing variety of payment processors on a global scale is a costly and time-consuming undertaking.
Accelerating Aggregators’ Growth
Aggregators that leverage a payments orchestration strategy can scale and expand into new markets very rapidly. Payments orchestration allows aggregators to save costs and complexity by outsourcing gateway integrations to a single application programming interface (API) that permits customization for each merchant.
By supporting merchants’ already-established payment services, aggregators not only can attract more merchants, but also can onboard them faster than their competitor platforms simply by “turning on” their gateways of choice. Orchestration also helps ensure compliance with the multiple regulatory requirements spanning different markets.
In addition, the technology allows aggregators to offer value-added merchant services, such as account updater and smart routing to ensure maximum conversion and reduced downtime. These services have the capacity to turn payments — normally an overhead cost — into a revenue generator for merchants by keeping their customers transacting. Reducing payment declines via smart routing alone can have a substantial impact on merchants’ overall revenue. Fifty-eight percent of consumers never return to a merchant that declines their payment, a massive lost opportunity for retailers.
As eCommerce continues its meteoric rise, marketplaces will continue to serve an essential function for small businesses looking to scale. As aggregators themselves look to scale their platforms, payments orchestration can make the climb easier.
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