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Saying goodbye to antiquated payment infrastructures

The last ten years have seen a transformation in the ways the world does business. Macroeconomic trends, regulatory developments, and technological advances have created new ways for businesses to offer value to customers. Business models that simply didn’t exist twenty-five years ago are now the norm, and are providing useful, efficient, flexible products and services to both businesses and consumers. 

Marketplaces are one of the most important of these (relatively) new models. Online marketplaces and ecommerce accounts are growing, and are very much here to stay. The success of these models depends on many factors, but one is absolutely crucial: payments. Without suitable payments processes, emergent models will fail. The gig economy is a perfect example. 

The unique finances of the gig worker

According to the Trades Union Congress the UK’s gig economy workforce has doubled in size since 2016, and this growth shows no sign of slowing. 

The gig economy relies on seamless interactions between platforms, customers, and either merchants, or employees, sometimes both – a complex system which presents new payment challenges. The entire model hinges on speed: merchants need a constant and steady cash flow; gig workers need to be paid on time; and consumers expect fast collections and refunds. Hiccups in the payment process could have both gig workers and customers abandoning their chosen platform in favour of another. 

Outdated payment systems 

The same is true for online marketplaces, which contribute $1.7 trillion to the global economy each year but still rely on archaic payment processes. Timely payments processing is essential to managing cash flows and paying staff and suppliers. But until recently, there was little choice but to carry out long and arduous reconciliation and other administrative tasks manually. The resource burden associated with simply managing payment flows has meant that smaller marketplaces can take more than two weeks to settle payments – a complete disaster for competitiveness. 

Re-inventing systems for growth

Thankfully, the importance of payments is coming into sharper focus just as new payments technologies and services become available. There has never been a better time to audit and improve your payments processes. Here’s my top tips for marketplace businesses looking to deploy or streamline payments for success:

  1. Re-evaluate the partnerships involved in your payment flows. Conducting an audit may reveal intermediaries that can be avoided or fees that can be mitigated or removed altogether.

  2. Leverage the rise of virtual ledgers and automate manual reconciliations using virtual IBANs (International Bank Account Number). Marketplaces can use virtual IBANs to control a master IBAN account from which they can allocate a segregated virtual IBAN account to each merchant, facilitating faster and easier settlement and reconciliation.

  3. Collaborate with specialists for success. Expertise in payments is vital. Partnerships with skilled professionals who can navigate payments, reconciliation, and regulation with ease enable marketplaces to focus on their core value proposition of bringing buyers and sellers together. The right payment partner will be able to identify efficiencies, help fulfil growth opportunities both nationally and internationally, and offer guidance on the right way to balance speed of settlement and cost. 

A new era of growth

In this highly competitive arena, where success relies on economies of scale and players must deal with small margins, payments is a secret weapon waiting to be deployed. Companies must push the boundaries of innovation so as not to be restricted by outdated infrastructure. Getting this right could save time, slash costs, and unlock the next wave of growth.


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This post is from a series of posts in the group:

Payments strategies 2015-2020-2030

Payments systems visions, strategies, trends, pilots, forecasting, and planning for the short-, medium-, and far-term.

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