Recent research by PwC suggests that the value of the global sharing economy will grow from $15 billion in 2013 to $335 billion in 2025. This dramatic rise underlines the way peer-to-peer platforms such as Airbnb and Uber are revolutionising supply chains and creating new business models that challenge the status quo.
But the change is not without operational challenges. Behind the fanfare and promise of the sharing economy, where buyers and sellers are creating exciting new marketplaces, there is a fundamental requirement for secure and dependable payment systems. Which is why businesses need a trusted financial partner to facilitate trade and to manage the flow of funds.
Payments in the international sharing economy are complex. Money must be divided between different accounts, currencies and geographies, while payment systems vary. And there is also the need to comply with a growing body of legislation such as the Payment Services Directive (PSD) for European businesses.
At Paysafe, we enable payment for platforms and marketplaces. Whether supporting the old economy or the new sharing economy, there are three essential stages for a successful payments infrastructure:
Let’s look at each one in a little more detail.
This covers due diligence and the need to collect key customer information (i.e., the requirement to ‘know your customer’). The payment provider/partner will complete all necessary due diligence checks against the seller in order to meet, amongst other things, obligations for anti-money laundering and counter-terrorist financing. Payment partners must understand newer business models, such as crowdfunding, and then carefully manage risks related to these sectors. At the same time, they must offer a seller an onboarding experience that is swift and seamless.
Buyers have their preferred methods of payment, which differ from country to country. Although payment acceptance may seem like a fairly standard service, payment providers that have built local card-acquiring networks may be able to offer better payment conversion to buyers in different geographies. Another consideration is how payments will be displayed in customers’ bank accounts or card statements. Chargeback transactions are avoided if you add the company name and order reference IDs to the transaction, and this is a key part of the consumer experience that is controlled by the payment provider.
Finally, once transactions have been verified and processed, the seller needs to be paid. This can be done through the seller’s bank account or with a digital wallet held in a local currency. Market participants will need to consider their costs (including exchange fees and the relative value of different currencies) as well as the availability of networks to reach sellers in another geography.
Paysafe is committed to the needs of the sharing economy. Our marketplaces team, based in London, is working closely with businesses to support and develop new ways of working, and is building an infrastructure for money to flow between buyers and sellers in marketplaces of all types. This will enable companies in the new economy to concentrate on growing their businesses without worrying about managing payments and becoming financial institutions by default.