How Smarter Payments Help Build Smart Marketplaces

Not every eCommerce platform is as user-friendly as Amazon. Craigslist and its ilk, for instance, still require buyers and sellers to meet in person to pay. This arrangement, says GM Jackson Elsegood, also requires parties to confront stranger danger fears. In the latest Smarter Payments Tracker, Elsegood discusses how digital escrow solutions can elevate these platforms into smart marketplaces that allow payments to occur in-platform — instead of between uneasy strangers in a parking lot.

Consumers have no shortage of options when it comes to buying and selling goods online: Marketplace giants like Amazon, eBay and Etsy have made the purchasing process simple and hassle-free for both consumers and merchants.

Not every digital marketplace has these frictionless checkout services, however. Old-school marketplaces, such as Craigslist, allow sellers to list their products and services, but the exchange of money and goods typically takes place offline. Buyers and sellers must meet somewhere in person and hope the transaction is genuine.

Digital escrow tools could help these “vertical” or “feature” marketplaces to develop smarter business models for both buyers and sellers. By using a company’s platform to communicate about a product’s price before committing to a sale, the marketplace can then hold the funds until both sides of the transaction are satisfied with the terms of the exchange.

Hoping to enable such sales, offers solutions that allow funds to be held in an escrow account until both the buyer and seller are ready to move forward with the transaction. In a recent interview with PYMNTS,’s General Manager Jackson Elsegood explained how digital escrow tools can transform digital sales and help feature marketplaces become smart marketplaces that allow both parties to negotiate within the marketplaces’ own platforms.

“Vertical marketplaces across the globe are looking at [companies] like eBay, Amazon, Etsy and Alibaba, and seeing them do all the transactions on-platform,” Elsegood said. “They’re seeing them move to a revenue model that reflects what they’re delivering, and, of course, they’re saying, ‘I want to be able to do that.’”

Tapping APIs To Build Smart Marketplaces

Most feature marketplaces’ messaging services enable buyers and sellers to engage in price negotiations, but the actual payment must be completed offline. This leaves marketplaces without insights into whether sales ultimately took place, the final selling price of an item and the payment method used to complete the sale. Marketplace platforms also miss opportunities to take cuts of each transaction.

This is only the beginning of feature marketplaces’ woes. Many of these platforms allow users to post listings for free, collecting money only if sellers want to boost their listings and attract more potential buyers. They’re also unable to learn more about customers’ purchasing habits. As a result, marketplaces often struggle to deliver personalized services to returning buyers, such as products and services related to their earlier purchases.

“Most marketplaces, outside of Amazon and eBay, don’t know anything about their buyers,” Elsegood said. “They don’t really know what communications are coming from a buyer or what offers are being made.”

In an effort to help feature marketplaces transition from old-fashioned ways of selling, where sellers list items and communicate with buyers outside the platform, recently launched a new application program interface (API) solution called Escrow Offer. The solution allows marketplaces to implement messaging for buyers and sellers, and holds transaction funds in a digital escrow account.

Escrow Offer can be implemented on a feature marketplace by adding a line of code, and, once in place, it allows sellers to submit listings, review offers and negotiate prices with potential buyers. When both parties are satisfied, the escrow funds are released through ACH or by wire transfer.

“This really opens up a huge treasure trove of data to those marketplaces,” he said.

Becoming A Smart Marketplace

Two key components are necessary if these platforms are to transition into smart marketplaces, one of them being the availability of customer purchasing data, which provides insight into how platforms can better serve existing buyers.

“The first is to know your customer [KYC],” Elsegood said. “Knowing who they are, where they are, what they’re searching for and what they’ve bought in the past.”

The second necessary component is insight and control over certain elements of the transaction, including the final price of a sale.

“Once you’re a part of that transaction in the marketplace, you can control a lot more,” he said. “You can control where the funds come from and go, you can control the speed of the transactions and throw in add-ons.”

These steps, he explained, are essential for traditional feature marketplaces to shift from old models that only give insights into sellers’ activities.

“You really need to know who the buyer is, and you need to be a part of the transaction,” Elsegood said. “These are two key parts to understanding the whole smart marketplace environment. Without that, you’ll only know about the seller.”

Bringing Big-Ticket Purchases Online

With the availability of greater payment controls and data insights, Elsegood hopes to see buyers and sellers move away from the Craigslist-style approach to commerce, in which two parties with minimal amounts of trust might agree to meet at a specific location to complete a sale.

“When you communicate with someone on Craigslist, you use masked email addresses and try not to hand out any personal information,” he said. “Then you end up meeting a guy in a dark parking lot at 9 o’clock at night in the suburbs and hope he doesn’t have a knife or a gun.”

Using data analytics and escrow tools to hold funds until the transaction is complete, Elsegood noted, can introduce trust into the relationship between buyers and sellers. By implementing the right tools, and shifting to a smart marketplace model, these companies can enjoy the same level of trust that consumers and sellers give to larger players like Amazon and eBay. is also aiming to bring marketplaces that sell high-value items  like automotive and marine equipment, and jewelry  into the eCommerce space. It’s already working with Efty, a marketplace that sells domain names and website templates.

“My hope,” he said, “is that these marketplaces that previously forced their customers to go offline and do their own kick-the-tires-like due diligence can now safely transact over a shorter period of time with a higher degree of confidence.”

As payments become smarter, businesses need to become smarter as well. Marketplaces that want to compete in the smarter payments landscape must be quick to embrace change, and help buyers and sellers trust each other more easily.