Home Small business financing The Integrated Funding Opportunity for Marketplaces and Gig Platforms

The Integrated Funding Opportunity for Marketplaces and Gig Platforms

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The United States will have more than 86 million gig workers by 2027, and 50% of online spending will take place in marketplaces by 2030. In Europe, 28 million workers are active on gig platforms and this is expected to double by 2030. The rise of gig economy markets has led to increased competition in the space. Gone are the days when Uber was the default choice for booking a taxi or Booking.com for booking a room.

Market places have become commonplace. The breakthrough to retain suppliers and customers in the long term is to add value-added ancillary services, which could arguably be the easiest way to create cohesion with suppliers and customers. This would discourage switching to a competitor, help vendors in their operations, and additionally create new revenue streams for marketplace platforms.

Integrating finance is the best retention strategy for marketplaces, as this article highlights. The figure below shows how integrating finance unlocks other network effects for marketplaces. By integrating financial services into the supplier’s digital account or journey, the platform creates cohesion, attracts and retains the best suppliers by providing a superior experience. This in turn means that the marketplace will get a competitive edge to host the best products and services that will attract customers. The integration of client-side financial services will lead to increased customer demand and return, which will attract even more suppliers and sellers to the platform. This creates a win-win situation for the platform, the provider and the customer.

Financial services integration allows providers to manage some of the most important aspects of their business, in one place. It will also give marketplaces the ability to help vendors improve the financial well-being of their business, which will ultimately lead to happier end customers (think pricing consistency, inventory management, or just survival through budgeting and cash flow management).

Here is a list of the top 10 “supplier-side” financial services to integrate into marketplaces. It has been prepared with typical “supply-side” market vendors in mind, such as:

  • List of apartment or hotel owners on Airbnb or Booking.com

  • Taxi drivers on Uber, Lyft or Bolt

  • Sellers selling goods on Ebay or Shopify

  • Petsitters, babysitters or teachers using online matchmaking platforms

  • Restaurant owners selling through UberEats or DoorDash

#1: Onboarding process

A first seller, or gig worker, opening an account on a marketplace would need a bank account, ID, possibly a legal entity, and provide proof of tax clearance. As the first point of contact with a vendor, the platform has the ability to provide a seamless onboarding experience.

By integrating Banking-as-a-Service into the platform, the seller can open a store/account and, at the same time, get a bank account – allowing them to manage their business in one place. Compliance checks and licensing will all be handled by the BaaS provider.

Shopify balance is a great example of how suppliers don’t need to open a traditional bank account. Businesses can keep their funds on Shopify, pay vendors, and receive offers from partners.

#2: Cash flow and budget management

Depending on the product or service offered, reservations, work or orders may be seasonal and ad hoc. This means suppliers struggle to predict cash flow. By owning the banking relationship with the provider, the marketplace has access to their transaction data and can easily provide information on inflows and outflows, as well as predict revenue and cost seasonality. This would incentivize vendors to run their business on one platform rather than multiple ones so they can have a single, consolidated view of cash flow.

#3: Financing and loans

It’s no secret that banks don’t cater to construction workers or small businesses with irregular incomes. Marketplaces have a history of supplier transactions and are in the best position to understand the business and perform a credit check and risk assessment of the supplier – which can be easily facilitated by AI. Receiving a loan could mean the difference between success and failure for sellers. With the right valuations and insurance in place, supply chain and working capital financing could become a profitable revenue stream for markets and, in turn, could mean they own the financing relationship. with suppliers, which creates a long-term bond. For a gig worker, it could mean the difference between a “payday” loan with exorbitant interest rates or an affordable offer from their trusted platform that knows their income trends.

#4: Investment and savings management

44% of Gig-workers are not saving for retirement. Integrating wealth management into marketplaces will help providers and gig workers improve their financial well-being. Consider helping them plan their quarterly tax payments and set long-term goals, such as planning for their children’s education or retirement and pension. Access to their transaction data could also mean pushing them, at the most relevant time, such as “payday”, to deposit into a savings account.

#5: Manage profit margins

Platforms usually provide suppliers with price information, based on demand and supply. Like AirBnB telling hosts that 90% of listings are sold out for certain dates and suggesting prices, based on apartments with similar characteristics to theirs. If the banking relationship with the supplier belongs to the platform, it will also be able to detect trends or seasonality in input costs. For example, they can help the supplier manage their profit margins by suggesting “energy prices have gone up 20%” or “we noticed your supplier bill is 20% higher this month”, “so consider to increase your selling price by X% to maintain your profit margins and ensure that you are able to cover the rent and the repayment of your loan this month”.

#6: Loyalty Rewards and Discounts

Chances are that all marketplace vendors in certain regions use the same vendors. Where transaction data is held, major vendors can be identified. Whether it’s laundry services for customers, fresh linen for beds, meat and fresh produce for their restaurants, service stations to refill their taxi or delivery service agents. When grouped together, the buying power of sellers is enormous and a discount could be negotiated with their suppliers. Integrating a cashback, rebate or loyalty reward with major suppliers into the platform could help suppliers manage costs and create stickiness for a satisfied long-term supplier.

#7: Digital Wallet

A top-notch add-on for markets is an integrated digital wallet. Of all the examples mentioned above, there is a lot of value in owning transaction data and the ability it gives the platform/marketplace to identify and provide bespoke value-added services to vendors. A wallet will also mean lower payment fees and faster payouts. This will allow platforms to remove third-party dependency or intervention and remove an additional low value-added process from the market-provider relationship.

#8: Insurance

With access to supplier transaction data, appropriate insurance products could be offered. These may include income protection, extended warranties or maintenance plans on purchased equipment, guest damage protection, cancellation coverage, accident coverage, healthcare insurance, supply chain disruption coverage, and more. With an integrated wallet, insurance claims can be paid instantly, allowing providers to focus on their business with peace of mind.

#9: Currency hedging

Marketplace sellers whose input costs are in foreign currencies are exposed to currency risk. A seller in the United States can order goods, to resell them on eBay, from China. They are expected to pay for the good within 30 days of placing the order. During these 30 days, the US dollar could lose value to the Chinese yuan and have a significant impact on their profit margins. The same can be said for suppliers with employees in different countries. With a
payroll coverage solutionsuppliers can also forecast and control their personnel costs.

#10: Manage VAT, taxation and accounting

Accounting software such as Xeroand Quickbooks have made it easy to stay complaint with tax, VAT and accounts preparation. Imagine if a marketplace had access to all incoming and outgoing transactions – wouldn’t it also be best placed to integrate accounting software to facilitate VAT and tax filings. This is linked to wealth management, to help them plan and save for the payment of VAT and taxes. Ideally, their payroll will also be managed on the platform, so all of their business is handled in one place.