Treasury Practice

Rise of the digital marketplace

Published: Jul 2024

Digital marketplaces are becoming increasingly commonplace across different industries, with companies developing new ways to connect vendors and their customers. What’s driving this trend, what are the benefits for the different parties involved, and what role can treasury play in supporting a marketplace?

Person adding shopping to cart digitally

Online or digital marketplaces have become increasingly commonplace in the last few years, not least because of the impetus provided by changing consumer habits during the Covid pandemic. The model isn’t only the preserve of large players such as Amazon and eBay, but has been adopted by a wide variety of industry sectors.

Indeed, research carried out by Edge by Ascential has predicted that by 2027, third-party sales through marketplaces will account for 38% of all global sales growth. The report also notes that the number of third-party marketplaces operating globally has jumped by over 500% since 2007.

“An online marketplace, whether it’s for business-to-business (B2B) or business-to-consumer (B2C) transactions, serves as a digital hub that links businesses and individual consumers to other enterprises for the purchase and sale of goods and services,” explains Enrico Camerinelli, Strategic Advisor at Datos Insights. “This platform facilitates efficient and streamlined trading between companies and individuals, leading to cost reductions and enhanced opportunities for growth.” As Camerinelli notes, marketplaces for B2B and B2C transactions enable businesses and individual consumers to connect with a broader spectrum of potential vendors and clients. “In the current digital landscape, B2B/B2C marketplaces have become a fundamental component of e-commerce and are the most rapidly expanding channel for digital sales.”

Digital marketplace landscape

Where the landscape for digital marketplaces is concerned, Dr Stephen Whitehouse, Managing Partner, Head of Payments at Oliver Wyman, says that major players like Amazon, eBay and Alibaba dominate general ecommerce, while specialised platforms like Shein and Depop cater to the apparel industry.

“In the food sector, services like Just Eat, Instacart, Deliveroo and Uber Eats lead the way, while the transportation industry has been disrupted by companies such as Uber, Lyft, Turo, Lime and Bolt,” he adds. Other examples include travel and leisure platforms such as, Airbnb, Expedia and Trivago, as well as freelance service marketplaces like Fiverr, Upwork and Taskrabbit.

Marketplaces come in many different forms, including horizontal marketplaces that offer a wide range of products and services across different categories, as well as vertical marketplaces that focus on a specific industry, product or service. Whitehouse explains that common sales models include commission models, in which sellers are charged a percentage of each transaction, subscription-based platforms which levy fees for accessing their marketplace, and ‘freemium’ models, which offer basic services for free with premium features available for a fee. Alongside the proliferation of B2C marketplaces, the B2B marketplace environment is also showing growth. Allison Shonerd, Head of Global Digital Disbursements, Global Payments Solutions at Bank of America, notes that B2B marketplaces enable transactions between businesses for everything from equipment purchases to office rentals. “This is a huge market, and it’s one that has existed largely outside of the digital space until recently, so there’s a lot of opportunity for marketplace growth,” she comments.

As the landscape continues to develop, Camerinelli argues that the “imminent evolution” for digital marketplaces lies in the integration of financial products and services, achieved through collaborations with banks and providers of financial services. “This represents the next significant step in their progression,” he observes.

Benefits of the online marketplace

Against this backdrop, there are many reasons why companies are choosing to adopt a marketplace approach. For one thing, says Whitehouse, there is a significant opportunity for revenue and margin, “which is absolutely critical for retailers in particular, which operate with very small margins.” He points out that companies leveraging digital marketplaces enjoy lower entry costs, as digital marketplaces tend to be cost effective distribution channels. For customers, the benefits include an enhanced user experience.

The marketplace model also provides an opportunity to build a trusted relationship with customers. “There are retailers that people visit frequently or infrequently, depending on the nature of the goods,” says Whitehouse. “But the idea of a marketplace is that you’re there, you’re immersed in that brand, on a regular basis.” This gives retailers an opportunity to distil that relationship into insight, and monetise it by enhancing the value proposition they offer customers. As Whitehouse observes, “For the retailer, that’s gold dust.”

On another note, Camerinelli says that leveraging digital marketplaces can enhance a business’ supply chain management. “This is achieved by streamlining the procurement process, overseeing shipping logistics, and cutting down on the time and expense involved in discovering and assessing new suppliers and customers. Furthermore, B2B marketplaces offer advantages to smaller businesses that might lack the means to put money into conventional sales and marketing avenues.”

Benefits of a marketplace approach

Allison Shonerd, Head of Global Digital Disbursements, Global Payments Solutions at Bank of America, explains how different parties can benefit from the marketplace model:

  • Benefits for sellers. Small and medium-sized businesses can gain almost instant access to a large customer base and a modern user interface, with value added services like payment solutions that would otherwise require investment to build out themselves.

  • Benefits for customers. Consumers may be more comfortable engaging and interacting with a trusted retailer’s marketplace, compared to a standalone ecommerce site. They are able to take advantage of payment choice when making purchases, and may have access to global sellers while still shopping in their home currency.

  • Benefits for the marketplace provider. The marketplace itself can benefit from the ability to deliver a true omnichannel experience, and from robust data on consumer buying trends and preferences that can inform their own strategy around inventory management. “In many instances, marketplace providers can then unlock additional revenue streams through things like advertising and foreign exchange, particularly as we see these marketplaces becoming more and more global and connecting buyers and sellers around the world,” Shonerd adds.

Role of the treasurer

As Shonerd explains, one of the core tenets of a digital marketplace is the ability to attract both buyers and sellers. “And from a treasury perspective, a great way to do that is through enabling a really robust and frictionless payment experience,” she adds. “As marketplaces become more global, treasuries have to ensure they have a comprehensive global liquidity and cash management strategy, with foreign exchange and payment solutions underpinning that model whereby buyers can buy in their local currency, and sellers can receive disbursements in their own local currency. The treasurer is at the centre of that, making sure that cash is managed appropriately and foreign exchange is optimised.”

Agne Masiulyte is Senior Director of Treasury at second-hand clothing marketplace Vinted, which is headquartered in Vilnius, Lithuania. The company’s treasury team was founded almost four years ago, and is responsible for managing areas such as banking relationships, FX risk management, liquidity management and investment portfolio management, as well as cash flow reporting. The product team, meanwhile, is responsible for relationships with payment service providers.

By joining the company at an early stage, Masiulyte says she has had the opportunity to start with a blank slate and design a fully centralised function. While the team could have used spreadsheets to achieve an overview of the company’s cash, the decision was taken to implement a treasury management system – Coupa – in order to enable continuing growth and support the company as it scales up, with integration to the Bloomberg Terminal. While Masiulyte says the company’s treasury isn’t very different from treasury functions in other fast-growing businesses, the team works closely with a number of teams across the business, including M&A, accounting and procurement. “And there is also a plan for treasury to take more ownership of managing users’ funds, which will be a new area for us,” she explains.

Treasury challenges

Working for a digital marketplace can also bring some additional challenges compared to a more traditional company. For example, Shonerd notes that there is an expectation within marketplaces of 24/7/365 availability, which means that treasurers need to be able to forecast, manage and facilitate money movements around the clock. “So enabling on-time cash and liquidity management and payment solutions can be critical.”

“Digital marketplaces treasuries face unique challenges, including handling high volumes of low-value seller payouts and ensuring timely processing through bank collaboration, with some regions enabling real-time payments requiring advanced system integrations for instant seller withdrawals,” comments François Dominique Doll, Executive Director, Global Treasury Advisory Services at Deloitte in Singapore. He notes that effective liquidity management is crucial due to the low-margin nature of e-commerce, necessitating sufficient cash reserves for smooth operations. In Asia, Doll says treasury operations “must adapt to the widespread use of mobile wallets and real-time payments, manage the complexities of cross-border trade with varying currency regulations, and address the prevalent cash on delivery (COD) method, necessitating additional cash flow management compared to pre-paid transactions common in the West.”

How can technology help?

According to Shonerd, API-enabled solutions have proved to be particularly key in this space, “both for payments themselves, and also for reporting and reconciliation. APIs can really help to facilitate that around-the-clock ecosystem, including dynamic cash management and payment processing.”

One important consideration is the ability to offer customers a diversified set of payment methods that enable them to make purchases quickly and easily, from credit cards to digital wallets. Sellers, likewise, will need access to a different set of payment methods, as well as tools that give them control over when and how they receive their payments, and in which currency. Bank of America, for example, offers merchant solutions that enable digital payments within a marketplace, alongside solutions such as a Pay by Bank capability in the UK and Europe, which allows consumers to make payments directly from their bank accounts. “On the seller side, we’re focused on solutions that put small businesses and consumer sellers in the driver’s seat when it comes to receiving payments from marketplaces, including alias-based and digital wallet payment methods,” adds Shonerd, noting that these solutions are all underpinned by robust foreign exchange capabilities, and enabled by the bank’s CashPro platform.

Transparent banking environment

On another note, Camerinelli notes that digital B2B marketplaces offer an opportunity for businesses to streamline their procurement process and reduce costs. “By implementing a unified system to oversee acquisitions, companies can utilise their purchasing strength to secure more favourable conditions and pricing from vendors,” he says. “A digital platform proves to be an indispensable asset for businesses aiming to simplify their procurement procedures and enhance their profitability.” Camerinelli argues that treasurers can regard digital platforms as an ideal setting to construct supply chain finance (SCF) plans with their marketplace associates – a model that enables suppliers to receive payment for their invoices sooner while allowing buyers to extend their payment terms. “In essence, the alliances between corporations, digital platforms and banks signify a transition towards a more cooperative and transparent banking environment,” he concludes. “Here, banks collaborate with diverse partners to provide innovative, customer-focused solutions that cater to the demands of today’s technologically advanced corporate client base.”

Delivering agility

British online food delivery company Deliveroo connects consumers, riders and merchants across local markets. The company works with approximately 180,000 restaurant and grocery partners, from local independent restaurants to major grocery retailers, and uses over 140,000 riders to deliver food.

Where treasury is concerned, Deliveroo chooses to operate a small and streamlined team, explains Alexander Hent, VP Tax & Treasury. “Besides me, we have an assistant treasurer, a manager and an assistant. They do a lot of the payments and make sure that our sizeable cash balance is invested in deposits and money market funds. We’ve deliberately simplified the scope of the treasury function – it’s quite operational, because when the team was set up we didn’t need more than that.”

Hent explains that Deliveroo has different teams responsible for different parts of the same money flows. “Anything that’s OpEx will be paid through our main banking partners and automated through a procurement system that’s managed by procurement and our financial operations team,” he says. “But anything manual goes through us. We also collect money on behalf of restaurants and pay them out – that’s automated, but it’s something that we oversee.”

Hent says that one of the main challenges faced by the treasury is less a consequence of operating a digital marketplace, and more about being part of a fast-growing company. “We need to be very agile. For example, when you’re entering a new country, people don’t always realise that you can’t open a bank account overnight,” he observes. “To help the business grow, treasury needs to be integrated with the business and have an ear to the ground.”

The degree of automation and integration with payment providers like Stripe also means that treasury needs to stay in close contact with the company’s payment tech team. As Hent points out, “For any sort of digital distribution model, I think the technical elements – having the right integration with different payment providers, and also integration with banks via APIs – is probably the biggest challenges from a platform perspective.”

Where providers are concerned, Hent says it’s important to work with providers that share the company’s mindset and agility. Compared to fintech providers, he observes that traditional banks aren’t able to tailor their offerings as easily, and may lack the necessary geographical scope and efficiency.

“That’s just the way they’re operated and managed – with a provider like Stripe, you can basically access the whole world,” he points out. “We do work with banks, but we’re selective about the types of work that we do with them, and very demanding about the service we get and how quickly things are turned around.”

All our content is free, just register below

As we move to a new and improved digital platform all users need to create a new account. This is very simple and should only take a moment.

Already have an account? Sign In

Already a member? Sign In

This website uses cookies and asks for your personal data to enhance your browsing experience. We are committed to protecting your privacy and ensuring your data is handled in compliance with the General Data Protection Regulation (GDPR).