Merchant onboarding and marketplace

blog centralpay

Le 2 December 2021

Marketplaces are experiencing considerable growth in the e-commerce ecosystem. At the beginning of 2021, they recorded a growth of more than 80% in their business volume. Where experts thought they would cannibalise companies’ sales channels, they have actually helped to diversify them and increase the visibility of the products and services sold.

This meteoric growth is based in part on the increase in the number of merchants listed on marketplaces. In 2020, this number increased by 46% on average. However, in recent years, marketplaces have had to comply with new regulatory requirements to ensure their effectiveness. The success of a marketplace relies almost exclusively on the contracting of quality merchants who will bring the platform to life through their sales. In this respect, how can the merchant onboarding phase impact the performance of marketplaces?

How do marketplaces work?

The marketplace model works on the same principle as a business broker. The online platform lists the products and/or services of various merchants in its catalogue, which puts them in contact with potential buyers (individuals or professionals). Orders are therefore placed by buyers directly on the marketplace and then transferred to the sellers. The latter are responsible for the execution, shipping and after-sales service of the orders. The platform is paid a percentage commission on each sale.

The success of a marketplace depends on many factors, guaranteed by the chosen payment service provider (PSP):

  • Integrating a large number of merchants without friction
  • Offering various payment methods and facilities to customers
  • Full accounting autonomy for merchants
  • Reduction of monitoring efforts of each platform player

Payment service agent status

The marketplace is therefore a win-win business model for all parties (platform, merchants and end customers). As they develop and generate significant revenues, their operation has attracted the attention of European regulators. In this new context, the aim is to ensure consumer protection, fight fraud and money laundering, and enforce competition rules.

In January 2018, the PSD2 (European Payment Services Directive No. 2) therefore introduced many regulatory changes for certain e-commerce players. These new rules therefore impact the payment management of marketplaces. Where many platforms used to operate as commercial agents, they are now required to acquire a “Payment Services Agent” licence to manage the financial flows of their platform. This payment licence is intended to prevent abuses by controlling merchants who resell via online platforms. This new regulation therefore impacts the business of marketplaces. Indeed, unless they obtain this licence, platforms can no longer hold funds on behalf of third parties, as was previously the case.

To obtain this famous status, marketplaces must use payment institutions regulated by the ACPR (Banque de France), to provide them with payment services, under their responsibility. With its “Marketplaces” solution, CentralPay is approved by the ACPR to assist platforms in preparing the “Payment Services Agent” file.

The importance of successful onboarding

The regulations in force since 2018 therefore complicate the contracting process for sellers on e-commerce platforms. However, this phase has a key role in the onboarding of the merchant, as it can determine the success or otherwise of the marketplace. Indeed, the more offers there are on the marketplace, the more it will be referenced on search engines, which will generate more sales and therefore more merchants will want to join it. Through this virtuous circle, it is easy to understand the usefulness of investing time and money in the onboarding of interesting sellers.

Thus, to guarantee the growth of the platform, the contracting phase for new sellers must be as clear and simple as possible. The proposal of simplified interfaces and automated treatment processes allows merchants and platform administrators to exchange information in a 100% digital way before finalising the account.

The merchant onboarding process

Integrating new merchants can be a real headache for platforms. Through their PSP, they have access to centralised and secure portals that allow for the processing of transactions between merchants and buyers in complete autonomy, allowing them to:

  • Initiate account creation requests, via API or via the PSP back office, which will then be associated with their marketplace.
  • Join the marketplace and the PSP remotely, using the dedicated contracting portal. The list of services and associated fees are validated and signed electronically.
  • Ensure KYC / KYB taking. The PSP’s compliance department collects and checks the legal documents (identity documents, Kbis, etc.), thus relieving the platforms of the regulatory constraints that usually generate friction.

To find out how to open a CentralPay account, click here

Payment is a crucial issue in the development of marketplaces. The onboarding phase is a key moment in the relationship between a marketplace and its merchants. With its solution dedicated to platforms, CentralPay simplifies regulatory constraints and simplifies the contracting of sellers by offering automated interfaces and processing. In the long term, this allows marketplaces to benefit from larger merchant catalogues and to ensure their growth.

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