Online Marketplace (Services) Landscape
Online Marketplaces—some call it crowdsourcing, for others, it’s considered the sharing or gig economy. For us, it’s the new lifeblood of the internet.
Today, businesses and consumers are growing ever-reliant on marketplaces to receive services on-demand. From travel to business to custom creative, the marketplace landscape is quickly evolving. Success is no longer hinging on supply and demand—if consumers need a unique item or solution where standard options are unsuitable, online marketplaces can play high-speed matchmaker.
Initially, marketplaces began as venues for buyers and sellers to transact in person. Now, these buyers and sellers are looking for solutions online. And, with an increasingly global and mobile workforce, marketplaces are adapting to offer vast, affordable, and convenient choices.
In the marketplace landscape, businesses and consumers are untethered to traditional processes. Workers now have the opportunity to monetize their skills and earn money independently, while buyers are open to a substantial network of highly specialized individuals. Online marketplaces are cutting out the middleman and, in doing so, are thriving in the technological age. It’s clear, this new-age business model will continue to overtake the current landscape.
Welcome to the era of “the right service at the right time.”
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STRATEGIES AND INSIGHTS FROM REAL-WORLD ONLINE MARKETPLACES
Automating Marketplace Partner Payments
Some call it crowdsourcing. For others, it’s the sharing economy or gig economy. But the umbrella term for these multi-sided business models is “Online Marketplaces.” And today, they are the new lifeblood of the internet. Businesses and consumers are growing ever-reliant on marketplaces to get products and services delivered on-demand. If they’re in need of some unique item or solution where standard options are unsuitable, online marketplaces are able to play high-speed matchmaker, while also offering vast, affordable, convenient choices. It is the era for being able to market and acquire the right product or service at the right time.
Through this paradigm shift, one aspect of online marketplaces persists: the need to compensate the continuing and increasingly global stream of service providers and suppliers. Payments are foundational to establishing a loyal, growth-oriented, motivated, and valuable network.
Suppliers and service providers are transient and have minimal loyalty. This requires that marketplaces quickly onboard new, eager partners, but also manage the churn of those partners that don’t get the results and gratification they need to continue.
Maintaining profitability can be problematic due to price sensitivities in an open market. Every side of the operation (fulfillment, customer interaction, and partner interaction) must be as streamlined as possible.
To grow the business into a recognizable and reliable brand, economies of scale must be employed. Operating locally without thinking globally stagnates the marketplace and limits take-off potential.
Most financial operations are focused on one side of the marketplace: customers. But this neglects the entire supply side of the platform. Delivering a great partner experience improves the longevity and quality of the marketplace.
Even if they have billions in venture capital, visionary marketplaces with a long view on their survival know that they cannot use PayPal alone to pay their partners. Putting in place an adequate partner payment infrastructure can meet the needs of a diverse partner base.
Outgrowing Paypal? Many marketplaces rely on PayPal when they start out. But it isn’t long before businesses start to outgrow PayPal as a payment processor. PayPal presents substantial challenges in paying partners. Some businesses resort to creating multiple payment pathways for various partners. For example, for all PayPal partners, they might have a dedicated process to remit payments. Then they carve out specific partners who must be paid through wire transfers or ACH, and others that that need paper checks. It can grow to be a major effort over time and limit the visibility of funds for senior management.
Ask Yourself “If our marketplace has 20 partners to pay, separate payment paths might seem manageable. But what do we do when we get to 200 or 2,000?” “Do we hire up staff, limit the markets we enter, or find a means to automate partner payments?”
Operational Benefits to Automation
An automated payment operation goes beyond sending wire transfers and making PayPal payments. It centralizes payment accounts, streamlines partner onboarding, increases payment options, reduces the tax compliance burden, and reconciles transactions in real time. Maintaining partners’ banking information and tax identities is an error-filled bookkeeping process. And like most accounts payable processes in a business, the entire endeavor operates at a loss to the bottom line, ultimately impacting profitability.
But is automation worth it? Here’s how automating payments can drive the business forward:
- Expediting marketplace growth to take advantage of global partners.
- Adding operational scalability and efficiency.
- Gaining real-time payment reporting to drive financial decisions.
- Redeploy strategically and analytically focused finance personnel away from transactional activities.
Ask Yourself “Should our marketplace be spending time on manual, non-revenue enhancing tasks?” “Isn’t our time better spent on other areas, particularly around achieving scalable growth, analysis, and insight?”