Marketplace PMs - how do you manage bad actors when it comes to payment disintermediation (i.e. consumer pays supplier outside your platform via cash/venmo/etc.)? Any good strategies?
We no longer process payments for Studiotime, but when we did we had some measures in place when it comes to messaging users about our policies through the product (booking request & submit flows particularly). We also routinely took a look at messages and booking requests that expired or were declined to see if this was happening. In the event that it did, we sent a reminder of our policies to both sides via email, but particularly focused on the studios (supply). They typically acknowledged this, stopped doing so, and would enforce our policies to anyone that would try to pay directly since they didn’t want to risk potentially being prohibited from using our platform.
Constant battle! This will always be an issue, particularly if there is no additional value to the supply side for you processing the payment vs. supply transacting directly with demand. If you are adding little and they have other options for payment, disintermediation is incentivised.
- Can you offer insurance or guarantees as part of payment? If you can take on more risk for both sides in the transaction, both are more likely to want to use you for payment. Demand included, you want them to push supply to pay within the platform.
- Is the margin you are taking viewed as fair? If you aren’t taking on enough risk for both sides, offering enough tooling (insurance, inventory management, guarantees, optimisation, marketplace tools) or have enough demand, supply can fairly ask what exactly am I paying for here?
- Are you capturing unique demand, an outsized share of demand or, even better, creating new demand? Finding customers that supply side can’t get elsewhere is valuable and increases risk to them if they get blocked from the platform.
- Can you build trust via confirmed transactions? Ratings, reviews that get built up by working within marketplace rules. You don’t get to write / receive a review without payment going through your marketplace. Ding people for not playing nice - down rank in listings, remove from categories, remove full stop.
- Can you make payment ridiculously easy? Convenience can be worth it. Make it so simple that it makes sense to transact.
- Offer the most payment options? Less difficult these days with the Stripes of the world but you open up more demand to supply if you can take as many payment options as possible.
- Lastly, you do of course need to be able to enforce all of this. Track payment volumes for anomalies, ask demand for feedback on supply, check for listings and descriptions that hint towards disintermediation, check pricing for suspicious entries that seem too low (supply could be asking for fees off platform) and act on it. If you don’t show teeth, why would anyone listen to you?
One thought — you might need a mindset shift. These people aren’t bad actors. It’s not illegal to pay outside of your marketplace. You aren’t owed this business. They certainly don’t think they’re doing anything wrong.
If you are tackling this like a fraud issue, but your users don’t think there is a moral or ethical issue, I think you can easily do a lot of damage to your own business.
It sounds like this is a major issue for your business model. I think you need to focus on delivering more value to encourage parties to keep the payment on your platform. Ask yourself: “Why would a user use our platform to pay, even if we didn’t force them to?”
At Parkade, we ban people who pay outside of the app. We aren’t always super hard-line about enforcing it, but repeated incidents will definitely get you banned from our platform.
Realistically though, it’s hard for us to know. So the best advantage we have is to make it super easy and reliable to use our app.
I learned this at Lyft. At Lyft, people have been “taking payments offline” since the beginning. It’s really hard to stop. But the best way to fight it was to ensure that we always had a driver available in the app, whereas if you grabbed a driver’s number and texted them later, they would be unreliable.
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