Is this the beginning of a trend?
The growing freelancer economy – already 11% of the working adult population in the U.S. are working as full-time independent contractors – has given rise to marketplaces such as Fiverr, TaskRabbit, Rover, Snagajob, Care.com and many more. It’s expected that the majority of the US workforce will be freelancers by 2027. Traditionally, marketplaces have been single-purpose or limited-purpose (see Airbnb for property rentals, Upwork for digital work, etc.). Purchases on any of these marketplaces generates a card transaction that must be “acquired” and it is the marketplace that decides which acquirer receives these transactions, not the property owner, freelancer, or driver.
The new Visa card recently launched by Uber in partnership with Barcalaycard demonstrates a growing payments domain expertise. Expertise now used to extend the Uber experience to pay for restaurant meals and theater tickets. “…[P]latforms and payment companies are looking to create ‘virtuous cycles’ of sharing customers, supplementing each other’s functionality…” noted WePay’s Rich Aberman, Chief Strategy Officer and co-founder. JP Morgan Chase’s acquisition of WePay shows that large acquirers have begun to realize that the power of these platforms extends beyond their ability to bring together buyers and sellers; marketplaces also hold the power of “payment transaction routing”.
It’s important to note that the clients these marketplaces cater to are very small merchants and individuals that gateways, acquirers and ISOs never captured. These clients do not want, nor could pass, the traditional acquirer vetting or credit approval processes. Marketplace platforms have allowed these small businesses to emerge as a new segment of virtual commerce. By generating such high transaction volumes and controlling their routing, marketplaces can determine who can capitalize on this expanded market share and, thus, have become attractive targets for large acquirers.
And sitting underneath many of these marketplaces, is WePay, a payments platform for marketplaces. That is what makes WePay so valuable and why Chase’s acquisition was so shrewd. WePay is a one-stop shop that marketplaces can turn to for quick deployment and continued support.
With this acquisition, Chase gains control of WePay transaction routing, and perhaps most delightful of all for Chase, the bank gets a presence at the checkout in a way that their competitors can’t. WePay can quickly benefit from providing the ChaseNet pricing and the real-time disbursement capabilities via real time payment providers such as Early Warning’s Zelle and The Clearing House’s Real Time Payments as a part of its offering.
Does this signal the beginning of a new trend of marketplaces acquisitions by large acquirers that also want to retain control of transaction routing? If history is any indication, the answer appears to be yes. Many years ago, acquirers were disintermediated by gateways that made it easy for merchants to connect to the payments ecosystem but also made it very easy for them to change acquiring relationships. Acquirers responded by developing their own gateways making it easy to connect directly to them as a way to retain control of the transaction routing. Further, acquirers are desperately looking for “value added” features that can generate additional revenue as basic transaction processing has become a commodity. Matching buyers and sellers as well as offering payout services fit the “value added” definition very well.
Therefore, we do believe that marketplace platforms are in for some interesting times and those valuation calculators will be working overtime soon.