Why is trust important for an online marketplace platform?
Building a trusted online marketplace platform
Online marketplaces enable people from around the world to buy and sell goods and services wherever and whenever they want.
The emergence of online marketplaces in all their different forms is transforming the global economy. Virtually connecting parties bypasses physical limitations, such as dedicated staff and locked-in resources, enabling successful marketplaces to grow quickly.
But creating a successful marketplace requires replicating the trust people have when transacting in person. Mitigating fears of misrepresentation, fraud and other risks is fundamental to online success. Developing a strong reputation of trust and safety is critical to growing a marketplace of vendors and buyers.
What is an online marketplace?
An online marketplace connects buyers and sellers digitally through a website or app.
Some online marketplaces replicate traditional buying and selling. But other marketplaces act as a third party to match almost any need with a provider.
This is a marketplace for sharing assets. Airbnb, for example, matches accommodations with people looking for somewhere to stay. The sharing economy leverages existing resources without the demands of new financing and production.
This marketplace enables contract work. Uber, for instance, matches drivers with passengers. The gig economy offers contract workers opportunities to generate income when they want.
Direct to consumer
These marketplaces, such as Shopify, let businesses sell directly to people. The business might create a virtual storefront or list its products in a directory. Consumers have access to products when they want them through a cohesive interface.
Peer to peer
These marketplaces, such as eBay, let people sell to people.
While each online marketplace model is different, there are common factors:
- Enough vendors with the inventory to interest consumers
- Enough consumers to make it worthwhile for vendors
- An interface that simplifies navigating numerous listings
- The ability to quickly add, change or delete listings
- Listings with enough information to make educated decisions
Some of the biggest questions marketplaces make are: How anonymous will buyers and sellers be? How will reviews be handled? What other market-design choices will help or hinder trust in a listing?
Marketplace success often depends on understanding what vendors and customers want and delivering an experience that helps them accomplish their goals.
Marketplace trust and safety programs
Marketplace trust and safety programs protect customers and build organizations’ reputations as fair and safe places to transact or interact.
Social, operational and regulatory elements all factor in to establishing trust in a marketplace. Different global markets have different standards and expectations. Fraudsters constantly modify their schemes. High-traffic periods can overwhelm teams and technology stacks.
The organizational structure will determine who has responsibility for ensuring the marketplace’s integrity. Some positions that oversee trust and safety are:
- Risk officer
Validates and onboards buyer and sellers
- Compliance officer
Ensures compliance with various Know Your Customer (KYC), privacy and local regulations
- Trust and safety manager
Handles sensitive, complex user-facing issues
But each employee’s actions and every company decision affects trust. Some of the more important considerations are:
- Code of conduct
What are the terms and conditions and how will the marketplace handle problems?
- Communication channels
How will buyers and sellers communicate?
- User experience
Do the design and interface promote trust?
- Verifying buyers and sellers
Are participants vetted?
- Verifying listing information
Are there procedures for checking listings?
- Payment options
Are payments handled by the marketplace, a third party or the participants?
- Customer support
Are questions answered quickly and effectively?
By proactively taking a trust-first philosophy, marketplaces can provide exceptional experiences, enhance their reputation and grow.
Verifying marketplace buyers and sellers
That approach presents risks.
“The lack of transparency and accountability in today’s digital marketplaces has contributed to the rapid rise of organized retail crime, which has become one of the top challenges facing the retail industry today,” said Alex Gourlay, former co-COO of the Walgreens Boots Alliance, and president, Walgreens.
Regulations to enable trustworthy, safe and transparent online environments are gaining traction. In the European Union, the Digital Services Act, which requires that marketplace traders be traceable, has become law. Under Article 22, Traceability of traders, anyone selling or promoting goods or services on online platforms must provide:
- Name, address, telephone number and email address
- Identity documentation
- Bank account details (for a person)
- Registration number (for a business)
Traders also must self-certify that they offer only products or services that comply with applicable laws.
Many marketplaces now verify all participants to protect buyers, sellers and the company’s reputation. That approach helps reduce fraud, mitigate risk and increase trust in the platform.
When marketplaces apply effective vendor onboarding, the business relationship starts with trust and a positive experience, allowing vendors to quickly start transacting. A risk-based approach to onboarding and technology that allows for adaptable, automated workflows helps marketplaces minimize delays and maximize safety.
Using identity verification for buyers indicates the marketplace wants only legitimate users on the platform. Identity verification also helps decrease security fears because having real identities on record provides accountability.
Growing a global marketplace
Maximizing reach for a global audience often requires efficient onboarding.
Each marketplace is unique. Understanding the different risks presented by marketplace vendors and customers and adjusting onboarding accordingly can minimize friction and maximize risk mitigation.
A risk-based approach to onboarding provides that flexibility. It allows the marketplace to determine a market segment’s risk level and apply appropriate identity verification and due diligence.
Factors that can identify the risk level include:
- Transaction frequency
- Industry or market segments
- Expected transaction amounts
- Customer and merchant locations
The initial risk level for opening an account might require verifying only a person’s name, address and birth date. The risk level may rise and require further verification when transactions begin or hit a threshold.
Seller onboarding may require additional steps to mitigate fraud, money laundering or other illegal activities. Typically, merchant onboarding involves seven steps:
- KYC and identity verification
- History check
- Business and operational model analysis
- Web content analysis
- Information security compliance
- Credit risk underwriting
The process also often depends on the marketplaces business model and risk-based approach. When platforms accept marketplace payments, revenue can increase but so can risk.
Preparing for marketplace success
The better a marketplace connects buyers and sellers, the more successful it can be. Combining data and technology can position marketplaces to improve those connections through insight into customer and vendor behavior.
Marketplaces can create trusted platforms by applying agility and efficiency starting at onboarding. Identity and business verification can help uncover bad actors before they engage with the platform.
Identity or business verification, though, can be complex, especially with a global audience transacting in a borderless economy. Verification includes:
- Determining the most effective data points and analyses
- Integrating different data, access requirements, system protocols, data use rules, information formats and other variables
- Accessing hundreds of data sources to verify identities online
- Complying with strict security, privacy and data regulations that differ around the world and change regularly
In the competitive marketplace environment, fast, low-friction verification can provide a competitive edge. First impressions are crucial, and slow, complicated customer and vendor onboarding can lead to frustration and onboarding abandonment.
Building a robust, trusted global platform requires sophisticated data, technology and expertise to foster confidence for everyone. Identity verification that quickly, accurately and compliantly vets vendors and customers can play a significant role in marketplace success.