FinTech has reinvented all types of marketplaces, be it a B2B marketplace—a digital platform that connects organizations and facilitates multiple businesses in one place—or a SaaS marketplace—a type of an application marketplace where customers can go to an online storefront to find, purchase, and manage cloud-based SaaS applications. Some of the earliest FinTech marketplaces are Stripe (Payments), Plaid (Banking), Leif (Income Share Agreement), Underwrite.ai (Insurance), and Sift (Security).
B2C, B2B, C2C, and P2P are some models of online marketplaces. Typically, a B2B marketplace has organizations that sell merchandise to suppliers in bulk, for example, Alibaba, while marketplace banking has Alibaba as a non-bank player offering financial products and services to customers who integrate or plug them into their service and solution offerings for end customers.
1. FinTech-Enabled Marketplaces: These marketplaces have tech-enabled financial services embedded directly into the platform. Here are some of their financial service buckets:
In-house insurance products facilitated by improved underwriting models
Non-traditional financing options such as rent-to-own or income-sharing
Novel and customer-specific solutions to manage transactions, deposits, and payments
These financial service buckets use AI and data advancements to enable them with one or more components. Incorporating FinTech elements seems like an incremental change, but the effect can be revolutionary. For example, Airbnb’s $1 million insurance policy mitigated the risk of guests damaging hosts’ property. Similarly, in 2019, Apple embedded financial services deeper into its iOS marketplace by launching Apple Card.
Most e-commerce marketplaces fit into this category, whereas players such as Amazon and Google are embedding almost an entire de-coupled bank in their marketplaces.
2. Marketplace Banking: A marketplace banking model is an ecosystem of aggregated products and services sharing similar characteristics presented to a customer (by a bank or financial institution) as a set of offers that also address specific customer needs. These products and services can be offered by various ecosystem partners, such as retail or healthcare players, or banks. Here’s why marketplace banking is popular:
3. FinTech App Marketplace: It is an ecosystem of FinTech solutions for financial institutions, primarily banks. FinTech app marketplaces are mostly owned and launched by financial services BigTechs that offer products or product suites to the industry.
Temenos Marketplace and Surecomp Marketplace are two FinTech app marketplaces owned by such BigTechs. Temenos MarketPlace curates world-class pre-integrated FinTech solutions with robust APIs in the Payment Processing, Digital Identity and Security, Digital Engagement, Regulatory and Compliance, Infrastructure and Compliance, and Wealth Management segments. It has recently added Marqeta—a card issuing platform that powers innovative payment solution providers such as Klarna, Uber, and Square—to its FinTech solutions ecosystem.
All these marketplaces focus on embedding FinTech into larger customer service lines in the smart ecosystem and even offer white label options to financial institutions.
Here’s why the ecosystem needs FinTech marketplaces:
Source: Adevinta FinTech-enabled market research report, 2021
The traditional operating model of organizations making money by charging fees for products and services with a product-focused approach is fast becoming obsolete. FinTechs step in by creating value for customers and saving time, resources, and money. Modern-day open architecture operates with Open REST APIs, microservices, containers, private and public cloud usage, and SaaS delivery models. FinTech marketplaces enable edge computing, big data, RPA, AI, SaaS, and cloud services to build quickly.
The lines between FinTech and marketplaces are blurring. Pairing financial services with online marketplaces yields massive returns. Online marketplaces saw a record investment of €78 billion in 2021 (YTD). The long-term success of marketplaces depends on their ability to adapt and integrate FinTech solutions into their platforms. FinTech-enabled marketplaces becoming the new norm could be called a new revolution.
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