Montreal, May 18, 2021 – New research from strategy consulting firm Edgar, Dunn & Company specialized in payments and digital financial services, commissioned by Nuvei Corporation (TSX: NVEI and NVEI.U), highlights the importance for marketplaces to build a future-proof payment strategy to maximize the opportunity for growth. The report “The Evolving Needs of Today’s Marketplace. Leveraging payment technology as a growth catalyst” also analyses best practices for marketplaces to optimize their payment processes and increase profitability.
A Nuvei report published in 2017 predicted that by 2020, around 40% of the world’s online retail market would be controlled by marketplaces. A recent analysis conducted by Digital Commerce 360 demonstrates that the marketplace share of total global web sales was actually 62% in 2020. Accelerated by local lockdowns during the pandemic, marketplaces experienced 81% growth in 2020, according to marketplace platform provider Mirakl’s Enterprise Marketplace Index. To capitalize on this faster than expected growth, many marketplaces now seek to create an entire ecosystem with large product choice as a means to retain and increase customer loyalty.
“Marketplaces face numerous complexities and need to constantly look at how the changing requirements of buyers, sellers and various external stakeholders impact their business model”, says Greg Toussaint, director at Edgar, Dunn & Company. “Being at the center of this intricate ecosystem, marketplaces now need to introduce new payment functionalities and solutions that cater to the needs of their local and global audiences.”
“Online sales have been accelerating due to rapidly changing consumer behavior, coupled with the increased accessibility and convenience of digital payments. This has created unique opportunities for marketplaces,” said Philip Fayer, Nuvei’s Chair and CEO. “Leveraging key payment best practices can support marketplace expansion to meet ever-increasing demand from both sellers and their customers.”
The report highlights key payments challenges that have become central for marketplace ecosystems. These include:
- Buyers/sellers onboarding: An often highly manual and time-consuming process which needs to be compliant with regulations. This can be problematic, in particular when onboarding non-local sellers.
- Pay-ins and pay-outs: Managing transactions can be challenging in terms of tax issues, reporting and reconciliation if the pay-in and pay-out providers are different. Equally, currency management and frequency, delay and cost of pay-outs significantly impact engagement and loyalty.
- Payment acceptance: Marketplaces need to offer a frictionless, secure and efficient payment experience, including local payment methods and emerging payment methods as these can significantly increase conversion rates.
- Regulatory constraints: In Europe, marketplaces are facing regulatory challenges including from PSD2 – imposing the regulatory requirement for handling funds between a seller and a buyer -, a European Regulation review of VAT payments for purchases made via marketplaces, and Strong Customer Authentication (SCA). In North America, marketplaces are accountable for fraud committed by sellers, and are responsible for verifying seller information.
- Financial reconciliation: Mixed baskets (one order including multiple sellers) can create issues of financial reconciliation at the time of delivery. Equally, split payments can involve high costs depending on the payment model when conducting settlements to multiple sellers rather than for the entire transaction.
- Fraud: Due to the significant increase in online payment volume, marketplaces have become increasingly attractive to fraudsters. This includes seller fraud and fake identities, money laundering and credit card theft.
To navigate the challenges, the report lists seven best practices related to payments and how these can be implemented. They are based on interviews with marketplaces as well as platforms and fraud and payments solution providers. The report recommends that marketplaces assess their current state of payments first, by conducting a 360-degree payments diagnostic. This enables them to focus on payment initiatives based on business priorities and to develop a roadmap to support their strategy.
“A boom in eCommerce sales and the evolution in customer behavior, following the COVID-19 crisis, have created attractive opportunities for marketplaces”, said Yuval Ziv, Nuvei’s managing director, digital payments. “Optimizing the customer journey through frictionless payment experiences will be more important than ever in order to remain relevant in this competitive environment.”
The report “The Evolving Needs of Today’s Marketplace. Leveraging payment technology as a growth catalyst” is based on a series of interviews with industry experts and marketplaces. The white paper is available for download at http://try.nuvei.com/mwp01.
We are Nuvei (TSX: NVEI and NVEI.U), the global payment technology partner of thriving brands. We provide the intelligence and technology businesses need to succeed locally and globally, through one integration – propelling them further, faster. Uniting payment technology and consulting, we help businesses remove payment barriers, optimize operating costs and increase acceptance rates. Our proprietary platform connects merchants in 200 markets worldwide with local acquiring in 44 markets, supports 470 local and alternative payment methods, nearly 150 currencies and 40 cryptocurrencies. Our purpose is to make our world a local marketplace.
For more information, visit www.nuvei.com.
About Edgar, Dunn & Company
Edgar, Dunn & Company is an independent and global strategy consulting firm specializing in payments and digital financial services. The firm was founded on two fundamental principles of client service: provide deep expertise that enhances clients’ perspectives and deliver actionable advice that enables clients to create measurable, sustainable change in their organizations. Established in 1978 in the United States, Edgar, Dunn & Company has expanded to meet the needs of its increasingly global client base. Today it serves clients in more than 45 countries on six continents from its locations in San Francisco, London, Paris, Frankfurt, Dubai and Sydney.
For more information, visit https://edgardunn.com/.
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