Payments initiatives for online marketplaces

Large online marketplaces are continually innovating their payment systems to enhance user experience, streamline operations, and stay competitive. Key initiatives include:

Alternative payments: Integrating multiple payment gateways

McKinsey states, “85 percent of merchants are planning to accept new alternative payment methods — defined as nontraditional payments, like digital wallets, account-to-account (A2A) bank transfers and buy now pay later (BNPL) — in the next one to three years.”

To cater to a diverse user base, marketplaces are incorporating various payment gateways, allowing customers to choose their preferred payment methods. This approach enhances convenience and accessibility. Amazon, Walmart, and ecommerce provider Squarespace, all offer ACH payments in addition to more traditional payment methods.

What’s next? Branded digital wallets funded by non-card money transfers. These alternative payment methods significantly save network interchange, funding additional consumer rewards and incentives. 

Adoption of digital wallets

Forty-six percent of U.S. consumers report paying via mobile phone using a digital wallet. Catering to end-user preference, digital wallets offer a seamless and secure payment experience. Marketplaces are increasingly supporting popular digital wallets to facilitate quick and efficient transactions. 

What’s next? Advanced online marketplaces can now offer a branded wallet for spending on their platform, across all merchants, with consumer-funded wallet balances.

Implementation of real-time payments

Real-time payments (RTP) are becoming increasingly integral to online marketplaces, offering immediate fund transfers that enhance user experience and operational efficiency. Real-time payment solutions are becoming integral to online marketplaces, enabling instant fund transfers between buyers and sellers. This improves cash flow and enhances trust within the marketplace ecosystem. 

Amazon and Walmart offer RTP via Visa Direct, but typically pay a transaction fee and percentage of the amount for the service.  

What’s next? Marketplace-owned payment exchange between buyers and sellers.  An early mover, U.K.’s Motorway developed a proprietary system to process payments between buyers and sellers entirely on its platform, with no bank interaction.

Emphasis on security and fraud prevention

Large online marketplaces can breed fraud at a large scale, making it difficult to detect and prevent. Ensuring secure transactions is paramount. Marketplaces are investing in advanced fraud detection and prevention measures to protect users and maintain platform integrity. This includes implementing robust authentication processes and AI-driven monitoring systems.

What’s next? Large online marketplaces are typically a sophisticated conglomeration of technology and processes. As they grow and mature, these marketplaces add-on more features and functionality, often through third-party partners and integrations. True ownership, along with compliance and regulatory oversight of the buyer-seller exchange, provides the highest level of control.

Making payments matter

Payments fuel the online marketplaces, but they can be overlooked for flashier programs and projects. By focusing on the core business of connecting — and facilitating payments between — buyers and sellers, online marketplaces can serve buyers with preferred purchase methods, sellers with faster payouts, and their own business with streamlined, lower cost payments.