2022 was quite a ride. For us at getpaid it represented the beginning of a new exciting chapter as we founded the company to tackle the next level of value through payments for platforms.
One of our principles is being obsessed with platforms’ businesses. And as we speak with small and big software companies, we have learned a lot about the challenges and opportunities when it comes to running these types of businesses.
That's why we identified five relevant trends for platforms and marketplaces for 2023 to watch out for.
And while we know that OpenAI and artificial intelligence make up most of the headlines in the new year, we focussed on practical and imminent opportunities for platforms and marketplaces. We are convinced that next to capturing the value from the emerging AI it is essential to leverage the value locked in the existing business. Especially in today’s times, which have put profitability back into the main focus for tech companies.
Without further ado, let's dive into our hottest platform trends for 2023.
While consumers are still spending money, inflation has definitely put pressure on buying behaviors. Volatile markets and increased uncertainty have created tougher times in the recent months and many platforms and marketplaces in the e-com sector experienced a (although relatively small) crunch in their economic numbers.
Nevertheless, we see the e-com industry in perfect shape to at least achieve mid to high single digit growth rates. One decisive advantage in comparison to brick and mortar markets is that e-commerce requires fewer personnel and resources. That means that inflationary pressures can be evened out or at least better absorbed with operational efficiency. This accounts especially for marketplaces and platforms which can profit from economies of scale. These players also allow their sellers to reduce their expenditure on marketing and technology while increasing reach and exposure to consumers at the same time.
And with new technologies like chatbots, VR and AR for better and more relevant customer experiences, coupled with changed shopping habits of consumers (eg. increased online grocery shopping), we think that e-com will continue its growth path to new dimensions despite an expected complicated macro-environment.
The trend towards non-cash and online payments has accelerated within the last two years due to the pandemic and the implied shift towards online commerce.
According to the ECB, the share of online purchases as a percentage of all Euro area day-to-day transactions has increased significantly to 17% in 2022 (up from 6% in 2019) - representing the massive ongoing shift from offline to online.
For point of sale purchases, the ECB reports that the share of card payments has grown by 9 percentage points to 34% in 2022, with contactless payments now making up the majority of card payments. Especially payments over 50€ are most frequently paid via cards or wallets.
Although cash still accounted for 59% of point-of-sale transactions in 2022 (down from 72% in 2019), we expect the trend towards electronic options at the POS to continue at its current pace. With the wide adoption of wallets (and essentially cards which often power wallets) and easy-to-use hardware for small businesses (like Sum-up), we expect 2023 to be finally the year where cards overtake cash at the point of sale.
While giants like Amazon, Shopify still are the first names popping up when thinking about platforms and marketplaces, we have come a long way from the old “it's only them” dichotomy. With software conquering the world, more and more software companies are finding niches and/or creating alternatives to the current options. For example, Bol, Allegro and Kaufland are building themselves a strong e-commerce proposition with regional reach in their respective countries.
And as outlined in previous articles, vertical platforms, which focus on digitizing operations in specific industries, continue to be among the fastest-growing companies in the world. Even in today’s volatile environment, which shows the robustness of these business models as there is less need for significant operational expenditures to run a platform or marketplace.
We expect these trends to continue, especially with a focus on deeper fragmentation. We are going to see more focused and/or regional marketplaces fully owning one or a limited number of product categories (eg. butcher, green-products, local service offerings).
This accounts also for vertical platforms, which are already offering solutions for different kinds of industries like running a restaurant, managing a gym/spa, ticketing and many more.
What we are going to see is even a wider spread to more concentrated, niche tasks, also known under the term Micro-SaaS. Micro-SaaS businesses focus deeply on one operational task and try to excel at it. Think for example of workspace management, invoicing, spell-checking, reservation or even Chrome browser extensions as Micro-SaaS potentials.
Integrating software has never been that easy (see also trend 5), so we are going to see much more application fields and use cases from these types of software companies.
Traditionally, platforms use a subscription model for charging for the use of their software, which means paying a regular monthly or annually fee. In most cases this fee was a tiered flat fee, usually consisting of 3-4 categories, which highly depend on size of the company in terms of revenue or sales. In some cases and especially in the case of marketplaces, the same concept was used, but with a shared commission (eg. 30% of sales) rather than a fixed amount.
But due to the recent rise of macroeconomic challenges and increased competition on the software side, platforms have experienced pricing pressures from their business customers. Especially, since sellers are in need to conserve capital and now have lower barriers to switch services. Paying a broad general fee, which in some cases includes highly irrelevant services, is often countering today's business customers’ strategic needs.
That's why we expect new platform pricing strategies to increasingly arise in 2023.
With the rise of embedded finance and value added services, platforms and marketplaces will thus increasingly tap into hybrid billing methods. Subscription will play less of a role for these types of businesses and will be rather used as a baseline component in combination with other factors, like pricing for payments, debt financing or unbundled product packages.
All in all we expect a move towards more usage-based models where SaaS vendors can provide more personalized solutions, adapt to changes in the market and customer needs, encourage customer loyalty and thus create important stickiness.
The appeal of becoming a super app is obvious. As consumers are shifting more of their daily activities online, there is a big opportunity for platforms and marketplaces who already own the relationship with consumers and sellers to become the all-in-one, one-for-all solution in their given segment. Owning touchpoints (like onboarding, payments, reporting, additional services) with customers has become a success factor and differentiator towards platform users as software is becoming more and more commoditized.
That's why we expect to see a bigger transition from third-party integrations into first-hand offerings. This shift will be mainly enabled by no-code and low-code solutions, which help to quickly build and deploy IT projects without the need of complex architecture.
Low-code, no-code have been a trend for a couple of years, but we think that this trend will widely broaden, not only among smaller startups but also among bigger and more established companies, which seek meaningful differentiation in a highly competitive environment. And with increased margin and revenue pressure, we think, platforms now have the right incentives to do so.
Broadening product offerings to create new diversified revenue streams has been a winning strategy for mega corporations like Amazon (eg. Marketplace, AWS, Prime) and the likes for a long time now. And low-code, no-code makes it very easy for other platforms to copy this type of strategy without putting in massive resources.