From simple barter to buy now pay later

Marketplaces have long served as the lifeblood of human commerce. Historically, they were physical spaces – from bustling squares and streets lined with vendors to grand venues like Istanbul's Grand Bazaar. Even the famed Silk Road, which bridged the East and the West, functioned as a sprawling marketplace where spices, silks, and ideas were exchanged.

Today, in the internet age, marketplaces have become both digital and global, instantly connecting buyers and sellers across the world. As a result, payments have evolved too - from rudimentary barter systems to today’s global payment platforms. The latter have a number of features that make them interesting in the modern age. For example, they include rapid merchant on-boarding, integrated loyalty, one click checkout, upselling and Buy Now Pay Later, all designed to drive and optimise sales performance.

But how exactly has the evolution of marketplaces driven new and ever-increasing sophistication of payment services? What challenges remain to be addressed and how is Worldline helping?

The growth of the digital marketplace

Nearly 30 years ago, on September 3, 1995, history was made when the first item was sold on eBay. A broken laser that was listed for just $1 and bought for $14.83. Online commerce has grown exponentially ever since, largely fuelled by advanced, integrated payments solutions.

Since banks first issued charge/credit cards in 1959, advances in technology have expanded their use and they are now the most popular method of payment.. In turn, the rise of the digital marketplace has, at least in part, been driven by the ability of customers to make card payments online. This increased sales exponentially, but also correlated with increased complexity in terms of the associated payment services.

Not to mention, with disposable income rising in developing markets e-commerce merchants and marketplaces are pivoting towards them. Given the prevalence of alternative payment methods, in developing markets, in developing markets, cross-border merchants must effectively match consumer's payment preferences. If not, they will quickly lose out to better-localised rivals.

Where do we find digital marketplaces?

When talking about marketplaces it is natural for people to think of Amazon or eBay (licensed marketplaces). Over two decades, these entities have forged the path for online retail sales, dominating the market throughout that time . Amazon remains by far the most popular online marketplace worldwide, averaging about 5 billion visits a month.

At the same time, bricks-and-mortar stores have also started to offer their own e-retail platforms to third-party sellers. Walmart, for instance, launched its own online marketplace in 2009. And after several years of modest growth, the investment started to pay off. Over three-quarters of active online marketplace sellers for the USA’s largest retailer joined the platform following the COVID-19 pandemic. By the first quarter of 2023, Walmart was the fourth most visited online marketplace in the USA. There has also been a growth of unlicensed marketplaces, powered by payment providers that handle the funds. Here, unlicensed marketplace operators use their marketplace tech stack to also provide payment services without mandatory registration with regulators (such as ACPR in France, Bafin in Germany). But merchants must be wary. Failing to work with regulated providers that have specific licenses exposes retailers to significant legal penalties in addition to reputational risk from potential money laundering and associated fraud.

Additionally, faced with an increasingly competitive landscape, some e-commerce companies have opted for a different business model. For example, instead of offering everything to everyone, Etsy focuses on filling the niche of handmade and vintage items. This online C2C/B2C retail platform has built much of its success by providing customers with a more personalised shopping experience as compared to mass merchandise sales. Fuelled by the coronavirus pandemic, active buyers surged from over 46 million in 2019 to approximately 96 million in 2023

And it’s not just buyers. Sellers are attracted to join these digital marketplaces because of the clear benefits on offer:

• Scaling potential
• Control over launch times
• Increased market presence
• Access to tools and logistics support

The growth of marketplaces can be further explained by network effects. Network effects describe how the value of the platform for one group (sellers) depends on the size and participation of the other group (buyers). Essentially, the more participants on your marketplace, the more valuable it becomes from everyone with buyers enjoying greater choice and sellers benefitting from a larger audience. In turn the platform itself enjoys greater growth and loyalty.

Worldline helps overcome payment challenges for digital marketplaces

However, this rapid growth has also brought new challenges for marketplace operators. And while overcoming these was the key to the evolution of digital marketplaces, for payments, challenges evolve daily. This is particularly pertinent when it comes to fraud.

According to Juniper Research¹, merchant losses from online payment fraud will exceed $362 billion globally between 2023 to 2028. A rise in e-commerce transactions in emerging markets is driving this growth. Merchants there are also facing new threats, such as an increased use of AI for attacks.

Retailers who suffer chargebacks lose out twice. Not only have the goods vanished but they must return funds to the customer and pay to manage the process. It’s clear that getting your payment services right is a key driver of profitable operations within global/digital marketplaces.

Worldline has a solution. Made by leveraging its European reach and expertise, Worldline has developed a specialist offering that is flexible, trusted, compliant, and designed to meet these challenges head on. Backed by consultants and supported via a European team of subject matter experts, it features:

• An efficient, thorough, compliant onboarding processes.
• Embedded payments through Worldline’s support of unlicensed marketplace operators. Ensuring compliant and secure payment solutions that adhere to PSD2 and other EU regulatory requirements.
• Support to more rapidly establish a marketplace – 6 to 12 months instead of the 24 months needed to build from scratch.
• Fund splitting between as many vendors and subcontractors as required.