Interview with Henning Gerlach, Director Marketplace for PayPal
“There is hardly a solution that can cover the requirements of marketplaces as individually and flexibly as ours”.
429 million active PayPal customers worldwide do it regularly: they pay by simply using their email address and password. Since it was founded in 1998, the online payment provider has never stopped growing. Most recently, it reported annual sales of $25.4 billion. Since 2017, PayPal is also a payment system for marketplaces, platforms, etc. in Germany and, with its offers and options, has taken up the role of a payment service provider. Thanks to companies like amazon, Booking.com, Uber, and Delivery Hero and their success, marketplaces gained an increasingly high level of relevance — especially as they are growing twice as fast as the normal e-commerce sector.
The payment experts from aye4fin are following these developments with great interest. That is why aye4fin’s CEO, Thomas Tittelbach, is excited to exchange ideas with Henning Gerlach from PayPal. As Director Marketplace for Europe, Middle East, and Africa, Gerlach supports marketplaces and merchants in finding the appropriate payment solutions while undergoing the transformation to a marketplace. This includes strategic consulting on PayPal’s marketplace solutions as well as classic topics such as PSD2, payment methods and seller experience.
In this article, aye4fin talks to Henning Gerlach about PayPal's new marketplace solutions.
aye4fin: Henning, thank you very much for finding the time to be here today to discuss the topic of payments for marketplaces. While PayPal holds a leading position in global e-commerce as an innovative payment method, for a long time there was hardly a solution for marketplaces. That´s why we´re so excited to learn more about your marketplace initiatives.
Henning Gerlach (PayPal): Since 2017, PayPal offers marketplaces a global end-to-end solution to accept or send payments. We have continued to further develop our marketplace solutions, so that today we can advise marketplaces on simple as well as very individual requirements and needs.
We want to help marketplaces grow. PayPal, in fact, makes it possible to accept payments in more than 200 markets and in a variety of payment methods. Other than payment, a smooth payout process is also extremely important to marketplace merchants. Our solution makes it possible to send payouts to merchants in over 200 markets and via up to nine payout methods. That´s how we offer our customers and partners the best possible experience, while also being able to map complex payment flows.
As an example, one marketplace can offer its customers payments both in US-Dollar and in Euros. What if the merchant wants to receive payments directly in US-Dollar in his PayPal or bank account? That´s no problem at all with PayPal.
A lot of our customers choose PayPal because they want to manage all their payment processes from a single source and with just one payment provider. With our products, we can offer all the relevant PayPal payment options – per credit card, invoice, in installments, as well as many other payment opportunities.
Moreover, we take care of all operative processes, like risk and compliance audits of marketplace vendors, while also offering a continuous monitoring of all payment transactions. Payout management and extensive reporting options complete our marketplace solution. Therefore, marketplaces and platforms can manage their whole payment processes with one platform.
aye4fin: Marketplaces in Europe are subject to heavy regulations under P2D2. (Note: PSD2 is an EU Directive for the regulation of payment services and payment service providers, which goals are primarily to increase security in payment transactions and strengthen consumer protection).
What solutions does PayPal have ready for marketplaces in this regard?
Henning Gerlach (PayPal): We want for marketplaces and platforms to be able to focus on their core business. PayPal fully addresses the requirements that come with PSD2.
Heavy regulations represent a challenge for many marketplaces. Most marketplaces do not have and do not intend to obtain a respective license. PayPal as a licensed banking institution and all our marketplace solutions are of course PSD2 compliant. The advantage of that is that customers do not require a license to operate the marketplace and can focus 100% on their business. Furthermore, PayPal handles the onboarding of merchants on the marketplaces and performs regular monitoring of payouts to minimize risks for marketplaces.
aye4fin: Do I understand it correctly that by using the PayPal merchant account, onboarding will be much easier and therefore faster for merchants compared to other market players? Besides that, what are other competitive advantages of the PayPal solution?
Henning Gerlach (PayPal): Exactly! This is where marketplaces benefit from our global two-sided network. Does a merchant want to sell on a marketplace and already has a PayPal merchant account? Then PayPal takes over the existing verification for onboarding. So far, this is possible in one of our marketplace solutions, though we plan to extend this process to our other solutions for marketplaces. Besides a lean onboarding for sellers, I would like to highlight the flexibility of our solutions. One of the ways our solution differs from others is that marketplace checkouts can be flexibly and independently customized with a wide range of payment methods. If a certain payment method should be offered by a third-party payment provider, it is possible to integrate it in the marketplace through PayPal.
Moreover, there is hardly a solution on the market that can cover the requirements of marketplaces as individually and flexibly as ours. Our solutions are modular and are characterized by a very high degree of flexibility, so that we can also address very individual Use Cases.
aye4fin: Many companies already have master agreements with payment service providers, for example in the field of acquiring. Can their services be separately integrated into the PayPal marketplace solution?
Henning Gerlach (PayPal): Yes, that is possible. However, we´ve also noticed the trend among many of our customers to consolidate their payment processes and unify them under one payment service provider. Therefore, according to the customer´s wishes, we offer a flexible opportunity to integrate an already existing payment service provider into the PayPal marketplace solution or, alternatively, we provide a solution from a single source.
A lot of solutions that are currently available on the market are incompatible with other payment service providers, which means that when a marketplace solution is not able to meet all the requirements, then a new one must be implemented and integrated. In this case, customers have to perform two parallel integrations and merchants have to undergo two onboarding processes. This is a big disadvantage for all sides. With our solution, it is possible to expand the marketplace by additional payment providers, without the need for further integrations. This approach also offers marketplaces the opportunity to use payment methods, which may not yet be available on our platform. The latter should rather be an exception, but it shows how much added value our high degree of flexibility creates for marketplaces.
aye4fin: For which target groups is PayPal’s solution best suited? From our understanding, it seems to be better suited for large companies. Which market segments does PayPal primarily serve with its solution?
Henning Gerlach (PayPal): We have a solution for small to medium marketplaces and platforms, which mainly operationally manage the market but who want to bear less risk. We also offer a comprehensive solution for the so-called large enterprise segment, where we´re able to meet all requirements. The requirements analysis together with the customer is at the base of the partnership and is one of the most important parameters for every decision making.
aye4fin: What costs can interested marketplaces expect? Various market players have in fact high start-up costs.
Henning Gerlach (PayPal): The costs vary according to the scale and complexity of the project. After the requirements analysis, we draw up a personalized project and integration plan, which describes the tasks for the technical implementation and the respective processes. At this point, together with the marketplace, we look at the overall efforts that need to be taken into account. Each marketplace project is supported by a team of experts covering all relevant areas to guarantee the best possible consulting.
aye4fin: How long does it take on average to introduce a payment solution for a marketplace?
Henning Gerlach (PayPal): The time necessary from the beginning of the project to the go-live depends on many different factors and on the complexity of the project. In our experience, smaller marketplaces generally introduce our solution within two months, while more complex projects may require six to eight months. Some of the tasks, such as the technical integration, sit primarily with the customer, and appropriate resources must be made available here.
aye4fin: What other exciting features does the PayPal marketplace solution have?
Henning Gerlach (PayPal): We´re continuously working to further optimize our services and features. For rather complex cases, PayPal offers nine different payout methods that can be used to send money to the merchants; this provides a degree of flexibility on how money can be received. So, PayPal offers real-time payout methods, where money is available instantly.
Together with MasterCard, we´ve recently introduced a service that allows large companies and marketplaces to receive payouts on pre-selected debit or credit cards. This service is available across the entire European Union and in the United Kingdom and allows transactions in EUR and GBP. Our payout solution helps companies to send payments quickly and securely to contractors, applicants, freelancers, and vendors around the world.
Our platform offers a wide range of features and allows marketplaces to integrate payout processes into an existing environment. Integrating our solution into an existing environment means having the simplest possible technical implementation. This also simplifies the collection, validation and storage of payment and KYC information by PayPal via so-called drop-in UIs. Alternatively, we offer an out-of-the-box portal, that is designed according to the Look & Feel of the respective marketplace. Also here PayPal offers a variety of opportunities to flexibly manage the scope and complexity for the marketplace.
aye4fin: Thank you very much for the exciting insights. We´re certain that PayPal will play an even more important role for marketplaces in the future with the solution presented. Especially the easy onboarding via the PayPal account is a convincing factor. We wish you much success and look forward to further joint projects.
Henning Gerlach (PayPal): Many thanks from our side for the interview.
* Note: This is a translation of the original interview in German.