Lessons on online payments, B2B eCommerce and Merchant of Record vs Payment Facilitator dilemma from Adyen and Faire.
Perfecting Payments Event
Our second in-person embedded finance event of the year was focused on payments in eCommerce. In particular, we wanted to take a look at intricacies in the market, uncover recent trends and dissect changes brought on by the pandemic.
A key question we’ve explored with various customers was whether B2B marketplaces should take on the role of Merchant of Record or Payments Facilitator. It’s a complex legal topic, but it came up so frequently we thought: now’s the time to get to the bottom of it!
We called up an expert duo, along with some impartial legal advice, to help take the room through the questions. We were delighted to have Paul Simms, VP Business Development at Adyen and Charlotte Broadbent, Country Manager at Faire there to share their insights and experiences!
Read on for key takeaways from their conversation with Richard Blakeborough, our VP Commercial.
Pointers on payments
The surge in new marketplaces and the growth of payment service providers (PSPs) has created a fertile environment for online commerce. PSPs having dedicated products means that it's encouraging new entrants in the marketplace space as complexity is removed.
With payments, you want to let your customers lead on what they want you to offer. If your customers are happy and have the right options that work for their businesses, they are more likely to do business with you.
The key thing in a marketplace model is that your interest should be directly aligned with your customers. Value ads around payments work as a differentiator and can boost your proposition.
Working on your customer experience will make your customers want to return. A lot of different things contribute to this, but your checkout and payment options are a key part of it. This should be part of how you measure success.
Retailers can't rely on old stockists and habits. Marketplaces open up opportunities for businesses, and embedding credit is a way of matching offline processes, with even greater stock options.
Trust is at the heart of any transaction and payment schemes (Visa and Mastercard) insist on transparency, particularly in the consumer space. Payment providers adhere to this regulation and will check every site that uses their services.
B2B is slightly less regulated at the moment but countries like France and Germany take a more firm view. In some instances merchants have to make their own judgement, as will PSPs. And if they’re aligned, they can do business.
The role of trust
For a transaction to take place there must be a level of trust, not only between the marketplace and the acquirer, but also between the marketplace and the shopper. This can pose a challenge.
Marketplaces such as Faire are already disrupting the typical model on which businesses operate. As traditionally they would be buying from trade shows, or using their own shoe leather and making direct connections with brands they want to buy from.
If a marketplace is asking the businesses to make such a significant behaviour change i.e. bringing their business online, they need to ensure that they do it in a clear and transparent way. This means that they get paid when agreed, in the right currency and the amount on the invoice is right, showing all the right deductions.
Regionalisation is extremely important. Different countries have different systems. Merchants need to work within those customs to build trust and a community.
Merchant of Record
Merchant of Record is the party from which the buyer is buying from. Their name appears on the bank or card statement.
An example would be – you’re transacting on Faire and that is who shows up on the card statement, making them the Merchant of Record. The platform has Faire branding and they were stated as the Merchant in terms and conditions at the checkout. If you have a complaint or concern, you go to Faire. The key thing is that a Merchant of Record fulfils Payment Facilitator, but it’s not a binary choice.
The ownership of the disputes can be highly beneficial as it builds trust and when well-handled can encourage customers to come back time and time again.
Merchant of Record might require greater involvement with risk and KYC, therefore being something that a marketplace can only take on as they get to a certain size and level of Gross Merchandise Value (GMV) and complexity.
Payment Facilitator is something that is only relevant to Visa and MasterCard. They introduced the role to allow PSPs like Adyen to register their customers with them.
A Payment Facilitator has to be fully PCI compliant – something which is becoming increasingly more enforced.
Payment Facilitator model isn’t bespoke to each business and the supplier will have more of the negotiating power.
One of the benefits however, is that there will be less pressure on the business to handle risk and KYC, as some of that can sit with the PSP partner.
Marketplaces are partners of the businesses they work with.
Great communication, empathy and listening to your customer’s challenges, rather than making assumptions, is crucial to building strong and long-lasting relationships.
Marketplaces can open whole new supply chains for their customers. Especially in an economic downturn it’s very important that you have flexibility in your supply and are able to provide cheaper options to your buyers.
Marketplaces have the potential to fuel a lot more business continuity during this difficult time.
This event brought a lot of interesting questions to the forefront on the role of payments in helping eCommerce platforms grow. We believe that a seamless and reliable payments journey can really impact how eager businesses are to transact online.
Thank you to everyone who joined the event and to our amazing speakers.