Successful marketplaces stand out for their capacity to reduce the risk of non-payment. Securing customer’s accounts is one of the keys to ensuring the sustainability and growth of their business. Two solutions are generally applied in European markets: Buy Now Pay Later (BNPL) and credit insurance. Their deployment will be different in 2024, but they aren’t a miracle remedy, as Benoît Chabanon, VP Operations  Marketplaces (Europe) at Webhelp Payment Services, explains.

To develop their business in 2024, marketplaces operators in Europe will have 3 main drivers:

  • Optimize their relation model (recruiting salespeople, developing the offer, working on the buyer’s portfolio, etc.).
  • Expand into new countries and markets,
  • And offer consumers new payment methods, as we’ll explain in detail below.

Payment methods and means of payment: what are the best choices?

There are 2 main types of payment method: prepayment and payment on due date.

At launch, the marketplace often relies on prepayment to secure the risk of non-payment – sometimes for buyers who are more accustomed to payment terms. Giving customers the opportunity to pay on time frees up business but, in return, creates a risk of non-payment. Managing this risk means ensuring that sellers adhere to the platform.

For the payment method proposed, it allows us to adapt to the buyer’s practices. While credit transfers (which can be used for both prepayment and payment on due date) cover a significant proportion of B2B payment transactions in Europe, other solutions exist to accommodate local practices or facilitate collection (such as SEPA Direct debit).

And in practice, to gain a foothold in new countries or markets, it will sometimes be necessary to offer consumers new payment methods!

Take the case of a French platform, well-established in Germany, which, on the strength of its success, would like to enter the Italian market. Two important differences will quickly emerge:

  • Payments have longer delay in Italy and require more follow-up and reminders;
  • Italians frequently use RIBA, a local payment instrument similar to a draft, but non-existent in Germany.

A simple example, but one that highlights the need for marketplace support from teams proficient in the language of the country concerned, as well as local business practices and payment methods. In the case of Webhelp Payment Services, this expertise of our European teams has been built up over almost 40 years.

A challenging environment for BNPL

Let’s move on to the other payment methods that could make the difference in 2024. The global and European economic context remains uncertain. Interest rates are expected to remain fairly high, which will continue to depress the cost of credit and money.

This is a far cry from the initial conditions that contributed to the success of Buy Now Pay Later (BNPL). BNPL has emerged in recent years as a small miracle: a simple, clear formula for consumers, a reasonable cost for sellers, and a sufficient choice of specialized, competent startups.

But that was before! Current rates are often incompatible with the business models of B2B Marketplace operators, and many young players have closed their businesses: BNPL exposes the risk of contracting with a financially fragile partner.

Renewed interest in credit insurance solutions

Somewhat overshadowed by BNPL, credit insurance solutions could be back in favor in 2024. The principle is well known: in the case of payment default, an indemnity is paid, thus reducing the risk of loss.

But in the marketplaces sector, credit insurance still maintains an image of legal and operational complexity, and indemnification times can be long.

However, insurers’ offer has been adapted to the needs of operators (API, automation, legal model) and remains significantly less expensive than BNPL.

Growing by improving customer relations and Credit Management

BNPL and credit insurance can serve as a lever to secure the business, but it will not replace the first building block: a robust Credit Management process which – added to efficient customer service – will represent a powerful growth driver for platforms (including, for example, upstream verification of the buyer’s solvency, the implementation of follow-up mechanisms, automatic reminders, debt collection, etc.).

This strategy of consolidating fundamentals will make all the difference in 2024, both for consumers, for marketplace sellers, and ultimately for operators. One of the keys to success will be to work with a solid and experienced partner in all the markets concerned.