![]() ![]() Just compare the confidence consumers have purchasing from sellers on Amazon Marketplace with the learnt vigilance Craigslist customers must adopt to avoid being scammed.īut certain types of marketplaces can achieve a sufficient level of trust without controlling the movement of funds. It can’t prevent bad transactions, force refunds, or withhold payouts from suppliers. With no control over the transaction, a company is limited in its ability to arbitrate. Other downsides are that there’s no opportunity to monetize payment processing and no way for the company to control the transaction. Not only does the transaction itself have to happen off-platform, but related functionality for both demand and supply, like order management and financial tools, won't exist either. Of course no in-product payment limits the product’s utility. That translates to development, operations and additional resources that can be spent focusing on other things. ![]() If facilitating a payment transaction is not high on the list of problems that customers need you to solve for them, there are real advantages to offering no in-product payments solution it means that a company takes on no payments risk and has no integrations to build or maintain. The first thing to consider is whether a transaction on the marketplace needs to involve an on-platform payment at all. Control over how merchants get paid and how funds flow through the system are up to the company. Embedded payments: a variety of different solutions where suppliers onboard as merchants with the marketplace. ![]() 3rd party referral: suppliers are required to obtain a merchant account with a payment processor and link that account to the platform to transact.No payments: when the company directs supply and demand to exchange money outside of the marketplace.The different ways a marketplace can enable supply and demand to transact fall into three categories: ![]() In this essay I’ll cover the different options marketplace companies have for building payments into their product and how to choose. How a company builds in payments impacts the ways it can capture value, create trust, and even achieve product-market fit. For marketplaces, choices about payment processing are often really about business models and product strategy. ![]()
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