The neglected middle: how international payments systems are failing the majority of marketplaces

How do ecommerce marketplaces move money across borders efficiently, securely, and cost effectively? The answer to this question will vary according to the size of the organisation.

For small marketplaces dealing in payment volumes of less than $50 million there's really only one option: leveraging local service providers and the SWIFT interbank messaging service. This approach is inefficient – it can take as long as four days for a payment to clear using SWIFT – and provides only limited options in terms of currency accounts and foreign exchange (FX) pairs.

Large marketplaces have more options to choose from. For organisations with payment volumes of over £1 billion, tier one global transaction banks like Citi and JPMorgan are on hand to help. This is a matter of scale. Only the largest of organisations can justify the massive investment in people, technology, and compliance required to build a smooth, low-cost global payments platform.

That leaves everybody else. The neglected middle. Even relatively successful businesses transacting $250 million or even $500 million in gross merchandise value (GMV) lack the scale necessary to be onboarded by a tier-one transaction bank. Yet these are the very same organisations that need expertise, regulatory capability, and banking and payments relationships if they’re to succeed in making the jump from being a regional to a global platform. So where does that leave these mid-tier marketplaces? How do they kick on to the next level of their growth?

A patchwork of payment providers
Until recently, the neglected middle have had no option but to stick together a patchwork of local providers. This approach layers complexity upon complexity. For each new geography, three additional partners must be stitched together to enable the three key functions of payouts, settlement, and acceptance. With each new market, intermediaries proliferate, as do inefficiencies and costs.

What's more, the approach means that marketplaces are pushed out of the flow of funds, stripping them of control. Having to accommodate the best practices of multiple providers, enterprises are unable to easily change their payments processes and so are unable to provide their customers with optimal service from a commercial and operational standpoint.

This neglected middle is in need of a system that works better for them and their customers. Fortunately, "payments curation", a new approach to enabling seamless international payments processes, looks set to finally meet this market need by unlocking access to technology and markets with a speed and simplicity that would otherwise be unavailable to this size of business.

Shaking up global payments
With a payments curation layer added to the enterprise payments stack, marketplaces can provide a simple entry point – via a single platform, one contract, and one API – into an otherwise complex patchwork of partners, technologies, and processes Given that international payments typically require businesses to source, negotiate and maintain 10-15 partners, contracts, and APIs globally, this is a significant benefit. From payment acceptance to settlement accounts to payouts, the payments curation layer enables access to best-in-class payments products in each region, optimised for cost, speed and efficiency. That means merchants can focus on their growth strategy without getting held back by what is ultimately a back-office administrative process.

For too long, mid-sized marketplaces have been caught between the rock of fragmented and inefficient local payments service providers and the hard place of having to employ a team of hundreds to scale globally. Now there is a third way. Payments curation offers a simple route into global payments technologies and processes suitable for marketplaces of all sizes. Given the increasingly competitive nature of the ecommerce marketplace sector, it also provides a significant differentiator for organisations looking to offer a premium experience to merchants and end customers. The neglected middle is neglected no more.