How Fintech is Bridging the Gap with Marketplace Companies

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[“How Fintech is Bridging the Gap with Marketplace Companies” originally appeared on Yahoo Finance.]

Online marketplaces have become commonplace in the age of the sharing economy. Renting out vehicles, ordering food, sharing rides and finding temporary help. If you can think of it, you can bet a startup already exists.

When making purchases, most consumers punch in their credit card details with complete confidence these days. Millennials now make more than 54 percent of their purchases online, and many never give a second thought to the payment platforms powering the transactions underneath it all.

As marketplace companies evolve and start attracting more and more clients, the need for robust payment solutions has become increasingly important. Platforms like Uber and AirBnB find themselves under the spotlight from industry auditors, as well as a target for fraudulent transactions, which means they have to demonstrate that they can account for the security of their customer transactions.

The Need For Secure Payments

Considering the breadth and depth of the financial responsibility involved, some of the major players in the peer-to-peer economy could actually be considered financial services companies rather than marketplace.

“AirBnB has a separate company that is a payment company — as in, it is a fully licensed payments company that only handles payments,” explained Tom Villante, CEO of fintech payment company, YapStone.

Not all marketplace companies are as big as AirBnB or Uber, nor do all wish to assume full responsibility for their financial operations. But, they must be able to provide a secure platform for consumers. The company takes care of the payments processing for customer transactions, but they also assume a large part of the risk, appealing to marketplace companies that want to focus on their core business, while ensuring security and legal compliance.

What Does YapStone Do?

YapStone offers end-to-end payment technology solutions, as well as expert support throughout the lifecycle of the electronic transaction.

Fighting fraud is a daily problem and with each new company that springs onto the scene, comes just as many ways of committing fraudulent transactions. “Before we got into marketplaces, we had three people in risk — now we have 70,” said Villante. A huge focus of YapStone’s efforts is on “building and integrating next generation fraud solutions.”

YapStone currently processes more than $17 billion in payments every year. The company has been recognized by Inc. as one of the 5,000 fastest-growing private companies. Additionally, YapStone was on Forbes’ list of America’s most promising companies in 2013 and 2015.

Complex Payment Solutions For Marketplace Companies

In marketplaces, the payments process is particularly complex. “When you have a marketplace and you’re bringing together essentially thousands and thousands of sellers of goods or services, with potentially millions of consumers, the payout is much more complex,” Villante stated.

Some of those complexities show up in the form of chargebacks, whereby the seller is forced to return the funds to the buyer. Use of fraudulent credit cards is also a considerable issue and fraudsters are increasingly creative in finding ways of manipulating the system.

When dealing with global customers, companies also have to comply with varying legislation. Charging for certain taxes and ensuring compliance with local competition laws.

Villante explained, “There are a lot of marketplaces that got big very fast that have no desire to be payments companies but want to monetize payments.” After 17 years of working in the payments industry, YapStone has gotten pretty good at spotting fraud and assessing risk.

“The more you know a vertical, the more you understand the risk profile,” Villante concluded. “By any measure, our losses on a basis-point standpoint are incredibly low by industry standards.”

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