Payments essentials in the sharing economy

Peer to peer platforms such as Airbnb, Getaround and Fon have rearranged the supply chain, empowering businesses and consumers to deal directly with one another while collecting commission on every deal. For the platforms themselves, this lucrative business model comes with certain operational complexities. Even though payments are becoming a less visible part of the transaction process, they remain one of the most pressing challenges for merchants, directly impacting their business growth.

Why do you think sharing economy payments are such an issue for merchants?

According to estimates from PwC, the global sharing economy will grow from USD 15 billion in 2013 to USD 335 billion in 2025. That staggering growth is chiefly driven by millennials, who have a mindset that access is the new ownership. Technology enables access and generates trust between peers and that’s what powers the industry.

In the sharing economy, customers are trusting merchants to rent out their property. Any factor that negatively affects that trust loses business. Even a single missed pay-out could turn a client off from offering their flat on Airbnb or their car on RelayRides.

What makes this even trickier is that payments in the sharing economy are complex. You have money coming in that needs to be divided correctly between various accounts in various currencies on various dates. You have regulations like the new Payment Service Directive (PSD2) that will make huge demands on your business. You have lots of competitors vying for the same consumer’s attention. And you have all the normal payment challenges faced by merchants looking to grow internationally, such as offering seamless payments, supporting local payment methods and staying secure.

Speaking from a PSP / acquirer perspective, what are the challenges associated with accepting split payments and how do you mitigate them?

When a merchant needs to split the payment for a transaction between themselves and one or more suppliers, the complications add up fast. Handling the process manually takes time and resources, plus it’s open to a high risk of error. When you are selling internationally, payments need to be converted into each recipient’s correct currency and released in-line with their local financial regulations.

As a PSP, we know this is a headache no merchant wants to deal with. That’s why we developed SlicePay, a tool for simplifying and automating split settlements. All the merchant has to do is tell us which suppliers should be paid, how much, at what time and in which currency and the system takes it from there. With minimum hassle for the merchant, the right funds are directed to the right bank at the right time.

What sort of payment methods do sharing economy companies need to offer and how can they tell which methods are important for further expansion?

The only way to know which alternative payment methods are required is in-depth regional knowledge. The payment types popular in, say, Germany are entirely different to those popular in France. So, if you want the freedom to branch out in all directions, you will need a payment solution that is flexible enough to support you in every region.

At Acapture, we have the expertise to identify precisely what payments a merchant will need depending on what markets they want to enter. As well as a catalogue of over 80 local payment methods, we also offer global card acquiring from our parent company Payvision plus the flexibility to add more payment methods to a merchant’s solution as they continue to expand into new territories.

In light of the PSD2 initiative, what can companies in the sharing economy do to maintain their development while staying in-line with the new regulations?

Trying to meet all of the demands of PSD2 could prove very costly and very time consuming for the average sharing economy merchant.

From January 2018 on, any intermediary party handling funds from a seller or a buyer operating in the EU will have to hold a payment institution license. To be granted a license, sharing economy merchants will have to make huge changes to their business, adding several new positions and departments, including a Money Laundering Officer, a Risk Monitoring Officer, an Underwriting Department and an Internal Audit Department, plus putting a cap on bonuses. All of that could cost them up to EUR350,000 and take up to a year and a half to implement.

There is, however, an easier and far less expensive way out. Acapture is already licensed as a payment institution and is fully compliant with PSD2. So, when a merchant uses our solution, we take on the burden of the regulations. The merchant no longer has to concern themselves with changing their processes and can get back to their core business.

You mentioned the competitiveness of the sharing economy sector and how much choice a consumer has. What can a PSP do to help a merchant in this regard?

In a word: consumer data. A PSP has access to reams of information about the preferences and behaviour of a merchant’s buyers that can help them to hone their product to better suit the target user. Not only that, a PSP with an effective data science strategy can actually improve a merchant’s authorization rates.

At Acapture, we provide flexible reporting to ensure the merchant sees precisely the consumer data they want (and are allowed) to see, omnichannel tokenization to monitor the consumer as they move between different touch points and checkout optimization to ensure the customer gets the best possible experience when it’s time to buy. 

Supporting all of this, our data science experts are constantly crunching the data behind the numbers, focusing on declined transactions and false positives, and offering actionable advice to make sure similar transactions are authorized in future. All of this adds up to happier buyers and higher revenue.

You also spoke about seamless payments. Airbnb and Uber were huge innovators in that regard, with an ‘invisible payment system’ at their checkout. How essential is it for sharing economy merchants to offer a seamless checkout?

It’s crucial. One of the reasons people love sharing services is that they are so easy to use. Airbnb is possibly the most user friendly ecommerce site on the internet. The buying process is completely intuitive, with no bumps along the way. It’s always clear what to do next and the payment takes a second to make. If a sharing economy business has a checkout that sends the buyer off the site or demands a huge amount of information, it will not stay competitive because it’s not offering one of the main attractions for the buyer, namely simplicity.

At Acapture, we support this simplicity with checkouts for mobile, desktop and tablet that slip seamlessly into our client’s visual presentation, with a minimum of fields and forms. We also support one-click payments and in-app payments so buyers are never more than the push of a button away from a purchase.

What is the first advice you would give to a merchant that wants to expand their business in the global sharing economy?

Know your markets. While online retail sometimes makes us feel like there are no borders, the differences between two regions or even two countries can be extreme. This is why it’s crucial to partner with companies that have true cross-border knowledge and experience in your target regions before you make the jump.

About John Snoek

John Snoek, VP eCommerce at Acapture, has over 20 years’ of go-to-market experience in product development, management and launch. Prior to joining Acapture, John was responsible for global marketing and product management, being also one of the pioneers in the field of alternative payments at GlobalCollect. Before this, John had successfully designed and marketed various knowledge base online tools, business benchmarking and e-learning products for companies and trade associations. He was also a consultant on ecommerce strategy for the Dutch government.

About Acapture

Acapture, a global omnichannel PSP, specializes in maximizing revenue for merchants and marketplaces with international ambitions. Acapture’s system features SlicePay for simplified allocation of funds to multiple parties from a single transaction, data science management for improved authorization rates, a one-day integration using one RESTful API, flexible, consolidated reporting, a streamlined reconciliation process, global card acquiring and the ability to handle 80+ of the most popular alternative payment methods and 160+ transaction currencies.