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Platforms: The impact of merchant onboarding

Marketplaces are a fast-growing part of the e-commerce ecosystem. At the beginning of 2021, their sales volume had grown by over 80%. Where experts thought they would cannibalize companies’ sales channels, they have actually helped to diversify them and increase the visibility of the products and services they sell.

This dazzling growth is partly due to the increasing number of merchants listed on marketplaces. In 2020, this number increased by 46% on average. In recent years, however, marketplaces have had to comply with new regulatory requirements to guarantee their efficiency. The success of a marketplace relies almost exclusively on the contracting of quality merchants who will bring the platform to life through their sales.

How can the merchant onboarding phase impact marketplace performance?

How do marketplaces work?

The marketplace model (” place de marché ” in French) works on the same principle as a business introducer. The online platform lists the products and/or services of various merchants in its catalog, putting them in touch with potential buyers (private individuals or professionals). Orders are placed by buyers directly on the marketplace, then transferred to sellers. The latter are responsible for fulfilling, dispatching and servicing orders. The platform, for its part, earns a percentage commission on each sale.

The success of a marketplace depends on many factors, all of which are guaranteed by the chosen payment service provider (PSP) :

  • Frictionless integration of a large number of merchants
  • Offer customers various payment methods and facilities
  • Full accounting autonomy for merchants
  • Reduced monitoring effort for each platform player

Payment services agent status

The marketplace is therefore a win-win business model for all parties (platform, merchants and end customers). As these companies grow and generate significant revenues, their operations have attracted the attention of European regulators. In this new context, the aim is to ensure consumer protection, combat fraud and money laundering, and enforce competition rules.

In January 2018, PSD2 (European Payment Services Directive No. 2) therefore introduced numerous regulatory changes for certain e-commerce players. These new rules have an impact on marketplace payment management. Where many platforms used to operate as commercial agents, they are now required to acquire the status of “Payment Services Agents” to manage their platform’s financial flows. This payment license is designed to prevent abuses by controlling merchants who resell via online platforms. These new regulations are having an impact on the marketplace business. Indeed, unless they obtain this license, platforms can no longer hold funds on behalf of third parties, as was previously the case.

To obtain this famous status, marketplaces must use payment institutions regulated by the
(Banque de France), to provide payment services under their responsibility. With its Fast Platform solution, CentralPay has been approved by the ACPR to help platforms prepare their “Payment Services Agent” files.

The importance of successful onboarding

The regulations in force since 2018 therefore complicate the contractualization process for sellers on e-commerce platforms. However, this phase plays a key role in the merchant’s onboarding, as it can determine the success or failure of the marketplace. In fact, the more offers there are on the marketplace, the more it will be referenced on search engines, which will generate more sales and therefore more merchants will want to join. Through this virtuous circle, it’s easy to see why it’s worth investing time and money in onboarding interesting salespeople.

So, to guarantee the platform’s growth, the contracting phase for new sellers needs to be as clear and simple as possible. Simplified interfaces and automated processes enable merchants and platform administrators to exchange information 100% digitally before finalizing an account.

The merchant onboarding process

Onboarding new merchants can be a real headache for platforms. Through their PSP, they have access to centralized, secure portals that allow them to process transactions between merchants and buyers in complete autonomy, enabling them to :

  • Initiate account creation requests, by API or via the PSP backoffice, which will then be associated with their marketplace.
  • Join the marketplace and PSP remotely, using the dedicated contracting portal. The list of services and associated charges are validated and signed electronically.
  • Take care of KYC / KYB. The PSP’s compliance department collects and checks legal documents (ID, Kbis, etc.), relieving platforms of the regulatory constraints that usually generate friction.

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Payment is a crucial factor in the development of marketplaces. The onboarding phase is a key moment in the relationship between a marketplace and its merchants. With its dedicated solution for platforms, CentralPay takes the complexity out of regulatory constraints and simplifies contractualization for sellers by offering automated interfaces and processing. In the long term, this will enable marketplaces to benefit from larger merchant catalogs, thus ensuring their growth.