In today’s digital era, marketplaces play a crucial role in connecting suppliers and buyers. Why? Marketplaces offer distributors a wide range of benefits such as increased market reach, reduced overhead costs and improved customer access. However, even with the advantages that marketplaces offer distributors, there is one area that desperately demands attention, and that is the complicated dilemma of payments.
The truth is payments are more often tricky and messy for distributor marketplaces. The challenge is multifaceted: On the customer side there are payment methods and financing, and on the vendor and operator side there are payouts and compliance requirements.
As an online presence becomes more commonplace and even essential for the survival of distributors, the dilemma of payments still stands. As a result, distributors should leverage digital payments solutions to address all the components of marketplace payments, keeping customers satisfied on the one hand and streamlining back-end processes on the other.
The Biggest Payment Challenges for B2B Marketplaces
An all-in-one digital payments infrastructure simplifies and streamlines the process for scalable business benefit and solves the three biggest payment challenges for B2B marketplaces: payment experience, net terms and compliance.
With no shortage of distributor marketplaces available, attracting new buyers relies heavily on differentiating oneself by offering a seamless and easy experience. Business buyers today are younger and less loyal—Merkle found that only 34% of buyers give their repeat business to a B2B brand they used in a previous purchase—so listening to customer expectations and then delivering on them has never been more crucial.
But buyers aren’t the only ones who demand a great experience; the vendor experience is just as important to the health of the marketplace. Especially if the digital marketplace is the first of its kind in a classically offline industry, the value of selling online needs to be obvious. After all, if the digital experience isn’t easier or faster than calling, there’s no incentive for vendors to sell their products on your marketplace.
For most industries, financing and net terms are a must-have, and an absolute deal breaker if not offered. A distributor marketplace cannot be successful or scale if they aren’t offering net terms.
Managing net terms in-house is far from convenient. It puts a major strain on time and resources, while moving the model online and offering it to new customers and is a significant challenge.
There are many financing partners available today that a marketplace can work with, but many come with stifling limits and lengthy processes. Other solutions require separate contracts for every transaction.
At the end of the day, buyers are looking for the offline experience they’re used to with online convenience. They want to log in, add to cart and pay their invoice on net 30, 45 or 60 days. They want the checkout experience to mirror the speed and ease of paying with a credit card on a consumer marketplace. Most financing options out there simply can’t offer this experience.
Marketplace compliance becomes complicated quickly. To process payments, marketplaces must act as a payment institution, payment facilitator or electronic money institution. However, this requires the marketplace to manage and develop payment services, which involves a range of tasks such as vendor integration, managing incoming funds and monitoring cash flow.
It’s crucial for marketplaces to carefully evaluate their options and understand the regulatory requirements before venturing into payment processing services. And for most, it’s usually best to operate as a payments facilitator, meaning the marketplace does not handle the money.
How Digital Payment Infrastructure Helps Distributors
Distributors are quickly catching on to the business benefits of the marketplace model. After all, B2B marketplace sales have grown 131% in the past year.
However, building a successful marketplace is challenging and payments sit at the heart of that challenge. Luckily today, marketplaces don’t need to look far to find a solution to address this situation. By leveraging digital payments infrastructure, specifically catered to B2B marketplaces, distributor marketplaces can offer a seamless payments experience without having to spend the money and resources investing separately in each of these capabilities.
Offering multiple payment methods, including different terms, in one unified checkout across all vendors is simple and easy to maintain. In addition, these solutions do the heavy lifting of financing and underwriting to free up cash flow and resources. The customer experience is elevated while the back-end processes become much more streamlined.
As vendors expand their business and engage in more transactions on a marketplace, they will find that an automated system is essential. Automated systems from payment providers offer valuable functions such as:
- Automatic Vendor Payouts
- Handle a high volume of transactions effortlessly
Having this infrastructure in place also ensures that vendors can scale their operations without concerns about payout logistics. And vendor growth inherently means marketplace growth.
Finally, compliance is simple with a digital payments solution because the third-party handles the transactions and movement of funds. With features like automated vendor payouts, marketplace operators will never touch the money and will not be subject to the many associated legal hassles.
The Goal: A Winning Experience for Customers and Vendors
Distributors venturing into the realm of marketplaces have plenty of opportunities available. With those opportunities come the natural challenges in better serving customers in an online space.
Creating a payment experience that buyers expect, while ensuring that the experience is equally as strong for vendors—is a must-have.
Implementing a robust payment solution is a win-win for all, while also offloading the responsibility of credit underwriting and the hassle of compliance. This in turn will not only improve operations and reduce costs for the marketplace but attract new customers, improve satisfaction, and drive growth and profitability. Payments then are a strategic move that lays the foundation for long-term success in the competitive distribution landscape.
Daniela Mzhen is a seasoned content strategist specializing in the B2B field. In her role at Balance, a leading B2B payment company, she writes about how distributions can optimize processes, enhance customer experiences and drive growth through innovative and impactful payment experiences.