B2B marketplace: more sales, security & efficiency with the right PSP

Viewing your e-business through the lens of a marketplace operator uncovers new opportunities for revenue and business growth, alongside distinct challenges. From the initial merchant onboarding to the complexities of revenue recognition, selecting the right payment service provider (PSP) is essential for simplifying these processes and unlocking the full potential of your B2B marketplace.

Establishing an online marketplace represents a natural progression for thriving B2C and B2B e-commerce enterprises. These platforms not only supplement existing sales channels but also promise substantial benefits for both you as the operator and for the vendors utilizing your platform.

What advantages does a B2B marketplace offer?

1. Expansion & differentiation of offers

Incorporating third-party products and services into your marketplace catalog allows you to broaden your offers without the need for additional investment in inventory and marketing, or production and storage.

2. Additional revenue streams

B2B marketplace operators generate income by charging commissions on sales made through their platforms. Additional fees and charges for posting listings, advertising, and providing technical and logistical support also contribute to the overall revenue.

3. Excellent Return on Investment (ROI)

Quickly expanding your product range and tapping into new revenue streams can yield a significant return on investment in a remarkably short period of time.

4. Increased agility

Marketplaces afford you greater flexibility in both the design of your offers and the implementation of innovative business and payment models, such as subscriptions.

5. Higher customer satisfaction & conversion rates

Marketplaces are an ideal environment for intuitive and efficient shopping experiences, enabling customers to make larger purchases with minimal effort – key to increasing customer satisfaction, conversion rates, and overall sales.

At first glance, the marketplace concept might seem deceptively simple. But if it really were that simple, everyone would be doing it.

What do B2B marketplace operators need to consider?

Transitioning to a marketplace model introduces complexities, particularly in payment management and revenue recognition. Unlike direct sales, revenues in a marketplace are typically divided among (several) vendors, with the platform serving as an intermediary. This setup requires adherence to a number of additional procedures and legal regulations, from merchant onboarding to revenue recognition.

Building a B2B marketplace: 4 challenges and their solutions

Challenge #1: Know Your Merchant (KYM) – streamlining merchant onboarding

To make business and merchant relationships on your marketplace as secure and compliant as possible, merchant verification, also known as Know Your Merchant (KYM) or merchant KYC (Know Your Customer), is an essential part of merchant onboarding. This involves a thorough verification process for new partners – from checking into their identity and legitimacy of their services to their business history – followed by assessing associated risks.

Traditionally, merchants used to submit the requested documents for this process, which were then checked manually – a process that is time-consuming and problematic in terms of data protection.

The solution

Some payment service providers (PSPs) have automated the merchant onboarding process, enhancing both security and efficiency. These systems verify the identities of legal entities, conduct multiple compliance checks, and facilitate tailored risk assessments based on your company’s objectives and regulatory requirements.

Challenge #2: Handling marketplace payments

Distributing funds among multiple users, transferring payments internationally – ideally in real time – and accurately allocating your own revenue for each transaction are key components of managing marketplace payments. Merchants demand not only smooth transaction processes but also control over the timing and methods of their payouts. Additionally, the proactive management of cross-border payouts is essential to maintain seamless financial operations.

The solution

Choosing the right PSP can simplify the management of marketplace payments through an integrated financial infrastructure, thereby reducing administrative workload. This setup centralizes transaction management, temporarily holds payments, and assists in the distribution and disbursement of funds.

Challenge #3: Fraud prevention on online marketplaces

The more merchants that sell through your platform, the greater the need for robust technologies to reliably detect and prevent fraud, especially in international transactions.

The solution

Modern payment services integrate fraud prevention and user verification functionalities. Automatically generated analyses and reports enhance transparency in payment processes, strengthening trust in the platform and ensuring compliance for both operators and merchants.

Challenge #4: Revenue recognition

Once your marketplace is operational, the real challenge begins: revenue recognition. This critical accounting principle ensures that revenue is accurately recognized in the appropriate period and that financial performance is correctly depicted. This includes properly documenting individual sales, subscriptions, and refunds.

Revenue recognition poses challenges even outside of the marketplace context. It involves navigating various revenue recognition standards, which vary depending on the accounting frameworks adopted (e.g. ASC 606 or IFRS 15). Plus, as e-commerce infrastructures and business models evolve, they tend to become more diverse and complex. For instance, in an omnichannel environment, transaction and payment data must be collected from diverse sources and sales channels.

Manual accrual accounting can be particularly tedious, as employees spend countless hours each month creating and maintaining spreadsheets. At best, this results in significant time expenditure; at worst, it leads to inaccuracies and non-compliance with legal standards.

The solution

With the right payment service provider, you can automate revenue recognition and ensure accurate, compliant accounting for both monthly and annual financial statements. By centralizing all payment activity and invoice data, various types of revenue, forwarding fees, and tax receipts are clearly delineated on a dashboard. Additionally, due dates for receivables and adjustments, as well as cash flow forecasts are visualized. Automatically generated reports offer a comprehensive overview, facilitating clear insights and quicker decision-making.

For marketplace operators, in particular, automated revenue recognition is an important asset. It simplifies the process of tracking transactions, attributing them to the correct merchants, and documenting the associated fees in their accounts. This capability turns financial management into a strategic advantage.

Successfully launch your B2B marketplace – with valantic!

Launching a marketplace opens new business opportunities and allows you to tap into additional revenue streams, but it also presents unique challenges. Choosing the right partner to navigate these challenges is crucial. Let us help you select the optimal PSP for your specific requirements to ensure the success of your marketplace implementation!