15.8.2023

The secret behind a successful B2B marketplace? Prioritising payments!

Hokodo

Business-to-business online marketplaces are exploding. Pumped-up with over $6.4 billion in venture capital investment since 2017, we’re now seeing firms race into the mainstream like Formula 1 cars. It’s an incredibly fast-paced world that shows no sign of slowing.

Believe it or not, 40% of today’s B2B marketplace unicorns have only been launched within the last three years. But the competition is already hot on their heels. Over 500 start-ups are getting ready to pounce. Today, there are eight B2B marketplace unicorns in Europe, with 22 “potentials” (according to Dealroom data) aggressively chasing the leaders.

With such fierce competition, B2B marketplaces need to focus – and fast. To help firms avoid firing blindly from all cylinders, we set up a webinar to ask industry leaders from Mangopay and Maison&Objet how to strategise for success. The answer was clear – it’s all about prioritising payments. Here are three of the most important tips we learned during the webinar.

1. Build payments into the marketplace foundation

“So many B2B marketplaces think about platform first and payments are almost an afterthought,” reflects Derrick Lynagh. As Head of Sales at Mangopay, a payments infrastructure service that supports over 2,500 platforms, Lynagh has seen a full spectrum of B2B online marketplaces. Payments, according to Lynagh, “really should be the foundation.”

“When you build a marketplace, address payments at a very early stage of the project,” agrees Sinziana Marian-Pudlowski, Chief Digital Officer at luxury lifestyle brand Maison&Objet that recently launched the MOM marketplace for B2B buyers and sellers. Marian-Pudlowski partnered with both Hokodo and Mangopay to transform Maison&Objet’s iconic trade fair into an online digital symposium. Payments were prioritised and the results speak for themselves.

Building payments into the initial infrastructure doesn’t just mean finding a way for buyers to pay sellers. It involves factoring in how the marketplace encourages sales and takes a cut of the transactions to become profitable. In the past year, profitability has become a major point of concern for fintechs and their investors. In August 2022, a major B2B online marketplace, ShopX, was forced to shut down following unsustainably low margins. Across startups, 38% fail because of poor cash flow, 19% crash because of an unsustainable business model and 15% directly because of pricing issues. All these factors could be avoided by implementing a robust marketplace payments model early on.

Staying in business is the number one priority for any marketplace, which means tackling the payments infrastructure as early as possible. “To leave it to the end is potentially very dangerous,” cautions Lynagh.

2. Become a payments problem-solver

Poor cash flow is not the only reason that start-ups fail. A substantial 35% will go bust because there was simply no market need. As the saying goes, “Just because there is a gap in the market, doesn’t mean there is a market in the gap”. This is why conducting thorough customer research is central to building a successful online B2B marketplace. After all, the point of an online marketplace is to make life more convenient, not less.

“Build an online experience according to their needs,” Marian-Pudlowski recommends, “ and adapt to them as much as possible.” For B2B marketplaces, this means accommodating flexible payment solutions that benefit both sellers and buyers. In other words, the most successful marketplaces will need to become problem-solvers.

Buyers, for example, are usually looking for the longest payment terms possible. But this can be harmful to merchants who need access to cash upfront in order to pay their own bills. It can create serious issues and cause a vicious cycle of poor cash flow – and it isn’t a rare occurrence. More than 50% of EU vendors have been asked to accept longer payment terms than they are comfortable with. As of April 2023, research from Marqeta found 55% of small and medium companies in Europe are waiting for payments of between £10,000 and £75,000.

But a problem like this could be solved seamlessly by an online marketplace with a Buy Now, Pay Later (BNPL) option at the checkout. Buyers can choose to defer settlement or pay in instalments, while the marketplace and sellers receive the full sum upfront. For Maison&Objet, this was critical. “We wanted payment solutions and BNPL solutions working together,” adds Marian-Pudlowski.

There are many flexible payment solutions available for businesses, depending on the type of company they are and the problems they face. Conducting in-depth qualitative and quantitative research into the issues and finding the right working partners to fix them is paramount for a successful B2B marketplace.

3. Partner for success

Trying to reinvent the wheel and build an in-house payments infrastructure from scratch doesn’t just waste resources for start-ups – it also throws away precious opportunities. The best payment platforms bring an entire ecosystem of expertise and experience with them. From built-in KYC compliance to anti-fraud software, payments partnerships can take B2B marketplaces to the next level. For the best results, Marian-Pudlowski recommends finding a partner who “shares the same vision.”

“Launching a marketplace is a super complex product,” elaborates Hokodo’s Director of Strategic Projects and Partnerships, Raphaël Caruso. “It takes time and it takes energy.” Caruso maintains that the best way to rise to the challenge is by “identifying players who already know how to work together.”

After almost a decade of competing against fintech, many banks are also now discovering this for themselves. 2022 research shows that 16% of banks now collaborate with SaaS, embedded finance, fintech or BigTech platforms, rather than trying to build their own technology in-house. For USA banks, the proportion is substantially higher at 28%, and rising all the time.

When it comes to picking a payments partner, all the experts urge new marketplace- builders to look to the future. “You need a partner that you can scale with, and grow together,” emphasises Lynagh. After all, nobody wants the pain of outgrowing a partnership and having to dump them in a few years. To accelerate into the future, Lynagh recommends looking for a firm that can “customise solutions and adapt to any marketplace.”

“It’s a human adventure!”

While B2B trade may be moving online, marketplace creators are still very much human. As companies build out their platforms, it’s important to always put real people at the forefront. Merchants, buyers and partners all come with their own unique mix of opportunities and problems. Creating a marketplace that truly works for everyone means understanding these needs on a deep level. Solving real problems and playing to everyone’s strengths is one of the surest ways to stand out from the competition. As Marian-Pudlowski says, “It’s a human adventure!”

Watch the full webinar below.