Control is the Marketplace Opportunity - with PayPal’s Luke Trayfoot, Director of Strategic Marketplaces EMEA
In the latest entry in our interview series with marketplace and eCommerce heavyweights, we sat down with Luke Trayfoot – PayPal’s Director of Strategic Marketplaces, EMEA.
In this candid session, Luke covers everything from marketplace payment challenges to practical advice on how marketplaces can enhance their seller verification and onboarding processes.
Thanks for taking the time today Luke, please could you share a little about your role at PayPal?
Sure. I lead PayPal's commercial and sales efforts for the marketplace segment in the EMEA region. These organisations have to undertake complex payment requirements between buyers, sellers and the marketplace itself. It’s a complex world.
Marketplaces vary hugely in size, product, geography and business model – what challenges are the most universal?
We see a number of critical challenges that marketplaces need to overcome. Of course, payments is top of that list, but also the likes of shipping, tax, product / service listings, customer experience and more.
Today, however, there is a fundamental focus on marketplace supply side growth and efficiency. Fundamentally, marketplaces are broadly only as strong as their supply and this affects whether they can meet the demand driven by marketing and customer experience.
The quality control and accountability of the supply side comes with a growing set of challenges, starting with the onboarding and verification of sellers. It’s from this point onward that payments, tax and shipping are driven forward to ensure sellers and the marketplace have a harmonious relationship.
So, with seller onboarding being a key challenge – how are marketplaces solving that today?
There are many ways in which marketplaces undergo and tackle seller onboarding. It is also critical to understand how it ties to the marketplace’s payment providers.
Broadly, could you summarise this process as three routes a marketplace can take across these topics:
In one example, the marketplace becomes a payments business within itself, by attaining a payments licence. Typically, this approach is reserved for the largest firms with the biggest budgets such as Zalando and Amazon.
Another way is for the marketplace to rely on a PSP (Payment Service Provider) to be responsible for seller onboarding and the associated payments flows. Convenient, yes, but it you are restricted by the PSP’s coverage to onboard and pay sellers, this can make international supply side growth difficult.
A third option is for the marketplace to work under an exemption or reseller model, whereby the marketplace does not require a payments licence and can therefore use multiple payment providers whilst being a custodian of funds. However, in this example the marketplace is firmly accountable for seller onboarding and compliance with the latest AML regulations. Without doing the right checks on sellers, a marketplace is exposed to risk and potential fines.
A marketplace can be in any these categories, but fundamentally, without drilling down into how seller onboarding and regulation could tie together in the best possible way, there’s a chance you could be missing an opportunity.
In your experience, how do you see the way payments, seller onboarding and regulatory obligations are tied together for marketplaces?
Without well-maintained digital onboarding and the right seller information gathered at the right point in time, paying sellers can be unmanageable. These things are paramount.
Marketplaces are unique and nuanced businesses, so ensuring that each constituent plays the right part in this journey is an opportunity for growth. Ideally marketplaces should gather intelligence upfront without seller friction then de-risk their operational burden whilst ensuring a seller can list their items or service quickly.
Given these challenges, how do you see marketplaces adapting to these needs?
Most marketplaces starting out will likely rely on a PSP to manage the entire payment system as well as their specific seller onboarding data requirements and associated workflow.
However, once scaling, marketplaces start to need a way to take control of the seller relationship in more detail to open the growth opportunity (geographic or categories). Most importantly is that the onboarding experience, seller quality control and ongoing seller maintenance are optimised and managed.
We see marketplaces adapting to this by decoupling the seller onboarding flow from the sole PSP account creation and thus forming a more dynamic workflow of that data. The consequence of which is that the marketplace can begin to scale, collect the KYC (Know Your Customer) information directly from sellers and then pass this to multiple PSPs to accommodate the growth opportunities.
What do you to see the most valuable element of PayPal’s partnership with detected?
We are working hard to service marketplaces from end to end. By endeavouring to be the best payment provider in the marketplace segment we know that our customers need enriched add-on capabilities, one of which is seller onboarding and KYC.
This partnership will allow both PayPal and detected to work together so that we can encourage marketplaces to be more intelligent with their seller communities, scale their business into more markets and categories all whilst mitigating the risk of various complex regulations that come with the territory of running a marketplace.
Which teams at marketplaces should be making these decisions and how has that changed?
Marketplaces make decisions in many ways, but on the whole we see a cohort of payments managers, risk/compliance officers and product teams leading the charge internally to create the improvements needed.