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Are the disrupted becoming the disruptors? The new generation of marketplaces

Traditional companies are following the example of digital business in the development of marketplaces

The development of marketplaces is no longer restricted to ‘new’, digital native businesses disrupting the status quo. Rather, traditional companies are following their example.

The e-commerce phenomenon is transforming the way that businesses are selling goods and services to consumers and small businesses, continuing to ricochet across many industries. However, rather than simply standing by whilst third party marketplaces capture more customers by selling goods and services directly online, major corporations are setting up their own marketplaces to build direct engagement with customers rather than using traditional distribution networks and sales channels. This shift in business model has a major impact on treasury at an operational level including the way they manage risk and liquidity. The challenge for treasurers is to adapt and respond quickly and proactively to help drive and shape these new business models, rather than being reactive in managing the consequences.

Digital platforms to build customer relationships

In the past, while consumer goods, manufacturing and industrial corporations typically had direct relationships with their largest customers, they were more likely to work with distribution partners to sell to smaller business and retail customers. This approach was convenient and avoided the complexity of dealing with a large number of small-ticket customers. It was often difficult, however to predict customer demand and preferences, inventory was tied up at distributors, and supply chains could be lengthy and prone to delay.

To overcome these challenges and embrace the benefits of digitisation, corporations are building their own marketplaces and online webstores and apps, enabling SME and retail customers to buy direct rather than through distributors or third-party retail outlets. By doing so, corporations are seeking to engage more directly with their end customers, to understand and respond to their needs more precisely, build loyalty, and reduce the length and lag time in their supply chains. Some industrial manufacturers are also bringing their suppliers and industrial partners onto multi merchant marketplaces they are developing, offering their customers a convenient, one-stop channel through which they can buy all their equipment, parts, consumables and value-added services.

Influencing change and driving success

The operational, risk and liquidity implications of this shift from distributors to direct marketplaces are substantial. While in the past most business was invoice-based, companies are increasingly selling and collecting funds in real-time. Credit card options are being complemented by instant payment systems and mobile payment options.

This creates working capital advantages for the ‘anchor’ company and enables any business customer to buy these products without having to establish a formal procurement relationship. However, it may disadvantage customers who have benefitted from credit terms offered by distributors. To overcome this, some corporations are extending credit terms directly, often dynamically in line with customers’ purchasing activities and payment behaviour. In locations where no real-time payment options exist, companies are also creating wallets that customers can top up before purchasing, which may themselves incorporate credit lines enabling a mix of pre-paid and term purchases.

Treasurers need to be prepared for the impact of the operational and strategic shift towards marketplaces by adopting the same digital mindset as the wider business. They need to collaborate closely with the business, their banks and technology vendors, to understand the end-to-end flow of transactions and data. While the effect on treasury is multi-faceted, there are three key areas on which to focus: operating cash, foreign exchange (FX) and liquidity.

Operating cash management

Establishing a marketplace involves new cash management processes, and potentially new technology. For example, customers buying through the marketplace will typically use different payment methods to larger corporate customers, such as cards, real-time payments and mobile wallets. Treasurers and their commercial colleagues need to identify and support the payment methods that customers prefer, without fragmenting or layering additional costs into their operations. Access to a payment gateway such as Straight2Bank Pay, that offers a consistent experience across multiple real-time payment methods, including wallets, is a valuable way of achieving this.

Where marketplaces are hosting multiple merchants but with the ability for the customer to buy a bundle of goods or services in one shopping cart, payments need to be split across multiple merchants. Treasury, alongside its banks and third-party payment services providers (PSPs), therefore need to consider how this cash is distributed, when and by whom.

Identifying and reconciling a higher volume of lower-value flows can also be a challenge compared with fewer, larger payment flows received from distributors. Fast reconciliation and account posting, including from wallets, is essential to allow the prompt release of goods, providing customers with an instant experience. This may involve implementing more sophisticated reconciliation tools, and potentially virtual account solutions to enable more accurate, faster reconciliation based on richer remittance information.

Foreign exchange

In many cases, companies sold to distributors in a single currency, such as USD, therefore reducing the need to manage foreign currency accounts and reducing FX risk. Conversely, when selling via marketplaces, sales are more likely to be made in the customers’ home currency. This may require dynamic FX pricing tools to enable real time pricing in local currencies and minimise FX exposures.


Whereas the timing of large distributor flows is mainly determined by invoice terms, a marketplace involves less predictable, real-time, 24/7 flows, potentially across multiple currencies and countries. Consequently, the cash conversion cycle and working capital dynamics will change dramatically. Treasury therefore needs to build different liquidity management structures, such as cross-border cash pooling, interest optimisation and local investment solutions. Furthermore, the concept of an end-of-day close when dealing with 24 x 7 x 365 day operations becomes less relevant and potentially obsolete, so treasurers need to consider how to manage intraday and ex-business day liquidity and FX.

While cash management operations, FX and liquidity may be the key areas in which treasurers need to take ownership when supporting a marketplace, these issues layer on top of wider issues of which they need to be aware or involved, such as who owns and operates the marketplace and is therefore in control of the sales, who provides the payment infrastructure technology, who is responsible for the payment licensing requirements in each country, as well as the organisational and tax implications.

Building skills and leveraging expertise

Treasurers need to engage early and proactively with the business to support and help drive these new business models. If they do not the risk is that business units will set up their own payments infrastructure without taking into account the wider FX and liquidity impact.

In reality, few treasury functions today have the experience and technology to support a marketplace, so this needs to be developed in partnership with banks and technology vendors. While existing bank connectivity may be web-based or host-to-host, establishing a marketplace is likely to require application programming interfaces (APIs) for real-time bank connectivity as well as integration of new banking services and platforms.

Banks and vendors can offer significant value, both by providing the relevant solutions, but also through advice on end-to-end process re-engineering, payment methods and security. By engaging this support, treasurers can be instrumental in shaping the way that marketplaces operate to avoid compromising operational and risk objectives, whilst maximising sales and optimising the customer experience.

This article was originally published in The Global Treasurer

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