Whether it’s Uber, Etsy or Upwork, online marketplaces provide businesses and freelancers with platforms to buy and sell services and goods. These direct-to-consumer channels bring new income and exposure to businesses and freelancers. In fact, the effect of online talent marketplaces alone has the potential to add $2.7 trillion to global GDP by 2025, according to McKinsey.
Yet, being in the center of a transaction between sellers and consumers, or freelancers and clients, two-sided marketplaces often risk disintermediation. Disintermediation is a phenomenon where users rely on the marketplace to find each other but then perform related future transactions—or even the current transaction—without the platform’s involvement and without paying any fees the platform may charge.
Specific reasons for this trend vary by marketplace and industry, but when disintermediation occurs, it generally boils down to the cost of fees charged by the marketplaces to freelancers outweighing the perceived value of the platform. To tackle disintermediation, marketplaces have offered other value-added services to their users, such as the ability to rate a freelancer’s services, member communities and customer service.
But another weapon – and one that we believe is often left untapped – is payments. For suppliers and buyers, communicating the advantages of an intermediary facilitating the payment experience can be one of the most valuable assets a marketplace can offer. Here are three examples of why:
- Speed and automation: Marketplaces alleviate the hassle of the payout and settlement process to suppliers. A freelance platform like Upwork stores payment methods, validates payment totals and automates payouts weekly. Freelancers working on the platform do not have to chase down clients for payments, saving time and hassle. For both freelancer and client, detailed reporting on jobs paid is also available. On the other hand, manually processing payouts outside the platform is a time-consuming and costly task that requires keeping track of various payment details, bank wires or PayPal fees and disparate reporting.
- Security: When a marketplace embeds a payment service provider like Transpay, layers of security are “baked in” to protect buyers from fraudulent transactions or charges. Marketplaces that excel at communicating their ability to protect their buyer’s payments, particularly at a global level, will boost their perceived value.
- Global access: As marketplaces expand globally, working with a payouts partner with local knowledge will ensure the marketplace is more readily equipped to navigate cross-border payments. Partnering with a cross-border payments specialist can help the marketplace understand the available payment types and regulatory requirements in specific countries where they operate. That detailed knowledge will help them offer a mix of preferred payments methods for both supplier and buyer, including payouts in local currencies.
Marketplaces are shrinking the world and changing the way we shop and work. As they fight to remain at the crossroads of suppliers and buyers, leveraging payments can be the difference maker for keeping users engaged and loyal to the platform.
Transpay provides an entire payouts experience under a white label and via an API framework to enable its marketplace clients to pay out at scale to thousands of recipients. To learn how Transpay’s Local Bank Transfer service can play a key role in helping protect your marketplace from potential disintermediation, check out the latest installment in our Ultimate Guide series below.