In this article we explore what marketplace operators must consider from a payments perspective when planning internationalisation and taking their platforms global.
Just as we have seen in B2C with sites like Amazon and eBay, marketplaces are quickly becoming the dominant channel in B2B e-commerce. Thanks to the efficiency, adaptability and scalability of the marketplace model, it’s estimated that 75% of all B2B transactions will take place on these platforms within the next five years.
In the past two years alone, the number of B2B marketplaces has grown by 300%. Looking to the near future, Gartner estimates that 15% of mid-to-large sized B2B sellers will launch their own marketplaces by 2023, and over two thirds (70%) of all marketplaces will support B2B transactions.
Propelling this upward trend is the simple fact that e-commerce has become a primary revenue driver within B2B trade. According to McKinsey & Company research, e-commerce now accounts for more than 18% of all revenue for the average B2B seller, which is equal to in-person sales revenue and greater than all other channels. Meanwhile, a Wunderman Thompson report found that 49% of last year’s B2B transactions in the UK, US and China took place online.
B2B marketplaces are no longer simply a nice-to-have but an essential and dominant part of the online purchasing landscape. 60% of buyers say they would purchase from a B2B marketplace, which is roughly the same percentage as those who would buy directly from a supplier’s website. Meanwhile, approximately one fifth of suppliers have opted to build a marketplace, and a further 60% are in the process of doing so.
B2B marketplaces are here, and they’re here to stay. So, what’s next for this burgeoning e-commerce channel?
The widespread migration of B2B trade to online marketplaces has created the opportunity for operators to take their platforms to new overseas markets. The very nature of e-commerce makes it easier to take an online marketplace into a different country than it would be for a merchant to open a physical storefront there. However, that doesn’t mean it’s a simple process, and with a third of sales potentially at stake, internationalisation is not a project which marketplace founders can afford to mess up – especially when it comes to payments.
We sat down with payments experts at Mirakl, trustshare and tomatopay to discuss why it's so crucial to get payments right when taking your B2B marketplace overseas.
A global payment network
“If you’ve got a payment network and it's quite localised, it means you can only transact with people in those regions,” says Nick Fulton, CEO and co-founder of B2B fintech for marketplaces, trustshare. “For merchants, that may be slightly less of a problem right now, but increasingly it is an issue, and for some marketplaces it's already a huge problem.”
Fulton highlights the importance of developing a payment network that is international by default. By this, we mean that PSPs, trade credit solutions and other payments providers need geographic reach matching that of the marketplace they’re working with. If all the payment partners of a given marketplace confine their operations to just one or two countries, then the activity and growth of that marketplace will too be restricted.
“If you can't allow buyers and sellers to transact in lots of different countries in your particular target vertical, then you're losing the potential for market share globally,” Fulton adds.
“It is so easy for marketplaces to scale internationally, and when choosing a payments provider, startups and businesses in general want to future-proof themselves,” explains Anna Tsyupko, board advisor and former COO at tomatopay. “So even if they are just in Europe or just the UK, they do not want to have to deal with multiple payment providers.”
The point Tsyupko makes is that, as a marketplace operator, you don’t want to work with a different payment provider for each country that your operations expand into. Not only does this result in higher costs, but also unnecessary complexity and a tedious amount of admin. Instead, partnering with one provider that is active in all the countries where your marketplace operates enables you to channel more time, energy and cash into business growth.
Marketplace founders should also consider the global growth roadmap of their platform when picking payments partners.
“First they're going to start, let's say, in France or in the UK, but then they want to be able to address business in the Netherlands, and then soon they're going to want to address U.S. business buyers,” says Sophie Zellmeyer, Head of Global Payment & Fintech Partnerships at online marketplace solution Mirakl. During the RFP stage, marketplaces should consider whether a vendor’s geographic capabilities align with their strategic expansion plans.
Think locally, win globally
With all this talk of internationalisation and taking your operations across the globe, it’s important not to forget about localisation in each of your new markets.
“To remain competitive, marketplaces must be able to provide local and alternative payment methods. That's really key,” explains Zellmeyer. “If you have a marketplace based in the Nordics, for instance, with business buyers needing to pay with Nordic payment rails, it's not the same as providing other rails like SEPA or a UK sort code. So, you need to be able to provide local payment methods.”
In each country or region, marketplace founders will discover that local buyers have preferred payment methods and that these can vary significantly, even between countries with shared borders.
“Some business buyers in the Netherlands, for instance, want to pay with bank redirect iDEAL,” says Zellmeyer. In fact, this payment method accounts for almost 60% of e-commerce transactions in the Netherlands, but is not found beyond the country’s borders. Other countries have their own payment idiosyncrasies too, for example BBVA Wallet and CaixaBank Wallet in Spain, or Giropay, Girocard and paydirekt in Germany.
It’s essential for marketplace operators to do their research into the preferred local payment methods and offer these options at the checkout alongside more ubiquitous methods like credit card, Direct Debit and bank transfer – else they risk alienating their new customers.
Converting currencies & customers
Another essential payment service which marketplace operators must be able to provide when taking their platform overseas is the ability to accept and distribute money in appropriate currencies.
“In the case of a cross-border transaction, marketplaces need to support different currencies to pay sellers and perform pay-outs in local currency,” Zellmeyer tells us. “So, cashing in, for instance, in Euro, but then paying out suppliers in Brazilian Real.”
For example, imagine a marketplace selling individual pieces and components for aeroplanes. Items can be manufactured and sold from anywhere in the world, while the marketplace itself may be available to buyers in several countries. A buyer might purchase three different products from three different sellers based in three different regions. So, the marketplace must be able to split the payment correctly and then pay out money in the correct currency to three locations across the world.
“Not all providers can do this because it's a matter of licensing regulation and about multi-currency capabilities,” adds Zellmeyer.
Then, there’s a selection of payments-adjacent issues which marketplace founders would be remiss not to consider.
According to freelance marketplace specialist Jérôme Connac, the biggest of these pain points is the management of cross border taxes.
“When I want to expand my sales everywhere in the world, I need payments. So, I need to understand the regulations of the agreement to accept payment everywhere in the world and to manage all the taxes,” Connac tells us. “When you send goods from France to the United States, it's a headache to think about how to manage the taxes. So this is one of the main issues.”
Marketplace operators need to possess a solid understanding of local commerce and payments laws and regulations in the countries they’re moving into – or to employ someone who does. For example, in many countries invoices are classed as a type of legal document and must follow specific rules which can vary from one region to another. Knowledge of these differences is essential for marketplace success in such countries.
Picking the right payments partners
At Hokodo, we promise our marketplace clients that we’ll provide digital trade credit solutions which are better than any peer can offer. Why are we so confident? Partly because we’re the first B2B Buy Now, Pay Later provider to have achieved a pan-European footprint.
Our solution is currently available for marketplaces operating in the UK, France, Spain, Belgium, the Netherlands and Germany, and we’ve got plans to use our recent Series B funding to expand further into Europe. Meanwhile, most of our competitors are restricted to just one or two territories.
“I believe a B2B payments provider cannot win in the market if it's not a global player,” says Zellmeyer. Similarly, at Hokodo, we believe that a global marketplace cannot win if it does not partner with truly international payments providers.
To find out how Hokodo’s instant digital payment terms solution can support your marketplace as it scales across Europe, book a demo today.