Online Marketplace Payments
Making partner payments to marketplace contributors (freelancers, designers, vendors, writers, crowd, etc.)
Businesses and consumers are growing ever-reliant on online marketplaces to get products and services delivered on-demand. If they’re in need of a unique item or solution, online marketplaces are able to play high-speed matchmaker, while also offering vast, affordable, convenient choices.
However, one challenging aspect of online marketplace payments 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. Marketplaces must pay their partners efficiently while mitigating risk, reducing compliance burdens, and maintaining profitability. It’s the only way in which they can grow their business in a lean, sustainable way.
Who are some online marketplaces?
This landscape graphic is can be used as a way to visualize the market by the type of offering (product or service), the industry or type, who they pay, and some representative brands in each category. It’s in no way exhaustive as new businesses appear with new offerings every day.
What are the payment challenges for online marketplaces?
What partner payment challenges do online marketplaces face? Here are a few.
- Partner Onboarding – Suppliers and service providers are transient with limited 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.
- Scale Business – To grow the marketplace into a recognizable and reliable brand, businesses need to employ economies of scale. That requires a lean operating methodology and high productivity.
- Partner Experience – Most marketplace operations are focused on one side of the marketplace: customers. But this neglects the entire supply side of the platform. Marketplaces can look to create a great partner experience to inspire loyalty.
- Payment Infrastructure – Visionary marketplaces with a long view on their survival know that they cannot use PayPal alone to pay their partners. They look to put in place an adequate partner payment infrastructure to meet the needs of a diverse, increasingly global partner base.
What are the requirements for automating online marketplace payments?
Automating online marketplace payments requires a comprehensive approach that covers the entire span of the partner engagement. Here are recommendations for how marketplace payments should be automated.
Partner Onboarding
- Payment method selection
- Banking or PayPal details collection
- Tax ID collection
Fraud and Risk Controls
- Tax ID validation
- Government blacklist screening
- Internal “do-not-pay” screening
- Two-factor authentication
- Accuracy Controls, including: Bank or PayPal account verification and Wire/SWIFT/IFSC coding verification
Remittance Processing
- Internal, multi-tier role-based approvals
- Multiple payment method controls (e.g. wire transfers, domestic ACH, international ACH, PayPal, prepaid debit, paper check, etc.)
- Choice of currency and payment thresholds
Partner Communications
- Notification system
- Issue resolution processes
- Self-service portal for account changes, payment history and status
Payment Reconciliation
- Real-time, discrete reporting on past and pending transactions
- Details of any fees leveed, including currency conversion
- Rich, auditable history of transactions
Manageable Infrastructure
- Updates for changing bank dynamics
- Ongoing diligence on tax and regulatory compliance issues
- Customized branding for partner interactions
- Integration to ERP, accounting, and GL systems
- High traffic, high availability server backend
