Why marketplaces are popular
Since humanity began, we have been drawn to marketplaces in some form. These have always been the place where communities can gather, sell wares, make purchases and gain recommendations on the best goods available. Nowadays, online marketplaces service millions of people around the world, with access to a rapidly growing selection of platforms providing a wide selection of items and services through a variety of aggregated sites. A convenient and fast solution for customers and an ideal channel for retailers looking to ride the growing wave of ecommerce, marketplaces offer an efficient way to satisfy consumer needs with a wide range of products, different price points and capitalising on the reputation of the overall marketplace brand. Combining a wide selection of products from a range of sellers and being able to pay for these in a single click is ideal for today’s efficiency driven consumers. Ecommerce is also an agile medium that allows the customer to be in control of their buying experience, purchasing from the seller they want, paying in the format they want and being served suggestions based on previous purchases for a customised experience. This ability to personalise shopping sites to market to customer interests is a key factor in maximising revenue and creating a solid, positive customer experience every time.
Customer expectations for marketplaces
With choice comes power. Thousands of marketplace sites are competing with one another for the same share of wallet, many selling the same or similar products. This puts the power to choose in the customers hands. In the past, decisions to shop at certain stores may have been based solely on price, however, this is no longer the case. KPMG noted in their “Path to Purchase Journey” that instead of the traditional linear route to making a purchase, it has become more like a web where consumers move with fluidity between purchase stages, influenced by both online and offline methods. This indicates that shoppers are not only researching but are making conscious decisions to use a specific ecommerce site based on personal criteria at the time of purchase. This means marketplaces need to compete not only on price, but also on choice and trust whilst providing that personalised, consistent and positive customer experience. Similarly, the Walker Customers report stated that customer experience will have overtaken price and product as the key brand differentiator by 2020.  This experience extends from the start of the purchase lifecycle, from when a consumer first initiates interest, through to the payment process and onto completion of the purchase, inclusive. Alongside the personalised approach that is now expected by online shoppers, the simplicity and ease of the payments process is crucial. In a recent survey 52% of respondents claimed they would abandon their cart and complete the transaction with another merchant if the payment flow wasn’t smooth enough. This relates not only to the entering of payment details but also to transparency of costs in advance of the purchase, with many sites having hidden fees or shipping charges which are not apparent until check-out. For marketplaces that foster transparency, frictionless payments and personalisation, all these elements work together to provide part of an optimal customer experience and guide toward the ideal “path to purchase” journey for maximum revenue and retention.
Importance of customer experience in the payments process
The importance of good customer experience is well documented and being aware of what the ideal model looks like is critical for online retailers. The internet itself is essentially a global marketplace, and marketplaces are built on reputation and trust. For this reason, reviews are critical to the success of online businesses, providing confidence to shoppers globally whether it be regarding the reputation of the site or quality of the goods or services sold. This was stated succinctly by Jeff Bezos, CEO of Amazon, “If you make customers unhappy in the physical world, they might each tell six friends. If you make customers unhappy on the internet, they can each tell 6,000 friends.” Customer experience is important throughout each stage of the sales cycle, however, when it comes to online, it is the payments process that often faces the most consumer and regulatory scrutiny.
With increased pressure around the introduction of PSD2 and stringent rules around SCA, seamless processes are increasingly difficult to achieve. This combination of requirements and customer preference dictate that the payments process must offer a strictly compliant, yet frictionless, user-friendly experience. Today’s shoppers, empowered by choice of brands, have become fickle in nature and intolerant to any friction during the transaction process. In a recent study, only 47% of respondents purported to find today’s online checkout processes “very easy”, while poor checkout experience saw 52% of online shoppers who abandoned a purchase, end up completing the transaction with a different merchant, and 89% of shoppers said they had ceased using a brand due to a bad experience. This makes it critical that online retailers get the delicate balance between compliance and user-experience just right, or risk impact to their bottom line, particularly with the introduction of two-factor authentication required by SCA.
Possible issues during the marketplace payments experience
It is estimated that European businesses stand to lose around €57bn in the first 12 months after the introduction of SCA due to cart abandonment as a result of added friction.With figures such as this, it comes as no surprise that the planned introduction of SCA in September, as part of PSD2, has already been delayed due to concerns regarding impact on merchants and customer experience. While the general public have a high-level understanding of PSD2, they are generally unaware that the incoming SCA requirements will impact them directly, and it has been suggested that the choice of three suggested authentication methods are too limiting, particularly in the case of mobile. Acknowledging concerns, the EPSM (European Payment Service Providers for Merchants) have suggested a delay of 18 months for SCA implementation in order to avoid significant disruptions to the market, in the belief that timely migration will have the best result.
Regardless of timings, the multiple added layers of complexity that SCA adds to the payments process means that the customer experience is very much under pressure. Although technology exists to mitigate this, the fact of the matter is that online retailers have worked long and hard to remove friction at checkout, and that any introduction of additional authentication steps may provide a deterrent for many shoppers. SCA will likely drive a spike in cart abandonment, and those whose payment flows are unoptimised will quickly see the effects of this illustrated. With this in mind, retailers and online marketplaces should prepare for a material impact on revenues accordingly.
Interestingly, irrespective of the concerns around disruption to the payments process, a study found that 60% of European consumers still state they would prefer some form of authentication at checkout,  and so the balance between security and simplicity of experience must always be considered.
Payments for marketplace sellers
Due to heated competition, marketplaces globally, and particularly in the EU with the introduction of SCA, are having to lead by example in customer experience for transactions online. The sheer number of marketplaces is staggering, and these figures are continuing to grow rapidly, giving consumers more and more choice. As outlined, the key differentiator in a sea of similarity must be the experience. In parallel, however, merchants who are selling on the platform also have the option to list their goods on numerous marketplaces and so their experience must be optimal too, particularly with regards to receiving payments.
Marketplace sellers are looking for reliability and speed of payment for fast moving goods, as well as support with regards to the SCA requirements. There are merchant tools with the ability to ‘whitelist’ regular, trusted customers providing greater control for consumers over their online security and a streamlined checkout experience. Improvements have also been made to the 3DS specifications (3DS 2.2), the industry standard for authenticating online consumer purchases which will be released in 2020. These improvements will mean that the consumers bank will receive more information on a transaction, allowing ease of authentication, more transaction approvals and reduces the need for the two-factor authentication step on some purchases, thus enabling the customer purchase to flow much more smoothly to the merchant. These changes and adaptations signal the commitment payment providers and processors are making to keep the customer experience and payment process as simple and frictionless as possible, with further advancements in response to the SCA requirements in the near future.
The increasing popularity of marketplaces and large volumes of transactions being made around the world comes with increased expectations around experience and regulatory scrutiny, particularly under PSD2. In order to stand out in a crowded market, platforms need to differentiate themselves based on the experience they provide to their users (and merchants) throughout the payments process. However, the close watch kept on payments security means the introduction of more stringent rules that jar with the long-nurtured frictionless experience. How platforms manage throughout these changes will justify their success, and those who are unable to implement suitable measures to mitigate damage to the customer experience will quickly find that these shortcomings will be highlighted, financially.
The precarious balance between regulation, payment processes and customer experience is under fire and marketplace platforms, merchants and consumers alike will benefit from the careful management of this, whether it be through partnerships with payments providers who can manage change in partnership, or via internal means.