Episode 7

Unlocking the potential of platforms

Consumers in APAC have embraced ecommerce platforms, with 54% doing most of their shopping on marketplaces. As they unlock new consumer demands, platforms create opportunities for small and medium-sized businesses to offer new services and access frictionless payment solutions. How can companies in the Asia Pacific region benefit from this evolution of the ecommerce landscape?

To find out more about the trends shaping the retail, restaurant, and hospitality sectors in APAC, check out our Retail Reports here.



Adam Byrnes

Vice President of Product & Growth, Freelancer.com


Romy Sandison

Solution Marketing Lead, Adyen


Sophie Guibaud

Co-Author, ‘Embedded Finance: When Payments Become An Experience’

Episode transcript

Charmaine: The way we purchase goods and services has changed so much in the past couple of decades, and so much of that change has been driven by platform businesses dominating the ecommerce landscape. The early platforms started off as simple marketplaces, but the sector has evolved, and platforms are unlocking consumer demand in surprising ways. While some are creating new modes of working altogether, like those being built for gig economies, others are transforming traditional industries such as insurance, legal, and business as a service.

Adam: Our customers definitely continually surprise us. Oftentimes, in really positive ways, with the way they use the platform. They innovate in some ways more than we do with the usage.

Charmaine: Welcome to Behind the Figures, the podcast that goes beyond the data to explore the trends shaping the retail, restaurant, and hospitality sectors and shares expert advice on how to leverage the latest technology and innovation to make the most of it. I'm your host, Charmaine Yee. In this episode, we're exploring the exciting world of platform businesses. Asia Pacific consumers have firmly embraced ecommerce platforms, with 54% doing most of their shopping on marketplaces like Amazon. This is far higher than the global average of 43%, according to the Adyen Retail Report. But platforms are not just enabling consumers. Platforms are also creating opportunities for small and medium-sized businesses to access new customers, offer new services, and gain access to frictionless payments solutions, explains Romy Sandison, Adyen's Product Marketing Lead, for embedded payments and finance.

Romy: I think platforms have been so successful because they've just simplified selling for their users. So before platforms, it was quite difficult for small businesses, entrepreneurs, or individual sellers to really gain access to the latest and greatest payments technology. This was often reserved for your big enterprise businesses, think of Nike or H&M, that usually have high processing volumes, have, you know, these big payment teams, and just generally have a lot of resources to invest in that type of payments experience. So now that platforms exist, they've essentially democratized access to great payments technology, and have allowed these groups of users or individual sellers, entrepreneurs, and small businesses, to be able to provide the same type of great payments experience for themselves. In addition to that, and I think this sort of ties back to where platforms have just generally had successes, they're able to tailor that payments experience to the users' specific needs. So if you're an on-demand platform, such as Uber, or Deliveroo, and you've got a lot of gig workers operating, they might highly value sort of an instant cash out option, so that at the end of their shift, they can basically click a button on their interface and then get the funds immediately paid out from that day's worth of work. So I think just being able to meet the specific needs of their users, and then also delivering this great payments technology has really made platforms so successful in this space.

Charmaine: The growth in on-demand platforms, which link people working in the gig economy with customers, has been one of the noticeable trends in recent years. And this growth is only set to continue, with estimates that the size of the global gig economy will reach USD 455 billion in 2023, a 55% rise from its value five years ago. One platform serving this community is Freelancer.com. Here to tell us more about this type of business and how it brings together gig workers and customers, is Adam Byrnes, Vice President of Product and Growth.

Adam: Well, Amazon built a trillion dollar business providing a one-stop shop for consumers to purchase a massive range of goods, executing the selection, purchase, and delivery experience end to end. And it's our view that a similar company should exist in the services space, for if it can be done for goods, why not services? So we help our customers by providing our clients with a huge range of global talent across an enormous range of skill sets all in one place, and providing an increasingly end to end hiring experience including things like collaboration tools, and so on, and so forth. The classic example might be a small business looking to get a logo designed, you know, they can go online on our website, they can post a project. There'll be, for instance, from all around the globe, expert designers who will beat or compete for that particular piece of work. You'll look through their portfolios, their profiles, you'll choose the one you like, you select that freelancer, they go on and they actually create a custom logo for you. They'll be using your brand assets, if you have any, or they'll invent it up from scratch, you know. Obviously working with you to achieve the sort of design needs that you have and the outcome will be stunning logo provided. And to be honest at all, it'll happen at costs that are unparalleled. Oftentimes, you know, people save 10x on sort of local hiring, right, because there's not the overheads associated. For example, a logo might even go for, say $50 or less, which would traditionally be a potentially multi-thousand dollar purchase. I believe, actually, recently there was a government department that spent millions of dollars on a logo and we sort of joked internally, why don't they just get it done on our website? It would cost them 100 bucks.

Charmaine: What could be simpler than matching buyers and sellers of services? Well, as Adam explains, running a successful and sustainable platform business is not as easy as it sounds.

Adam: So platform businesses, specially marketplaces, are exceptionally difficult to start and scale. There's a lot of talk in history around like the chicken and egg problem, which one comes first, you know. On one side, you have your buyers of services. And on one side, you have your sellers. And if you go out and you bring online, a whole bunch of buyers, and there's no service providers to fulfill them, then that obviously doesn't get you anywhere, and vice versa. You really need to bring them on at the same time. And that's often exceptionally difficult to do. It often requires a lot of sort of marketing, and so on, and so forth. However, once they do achieve this critical mass, they're extremely difficult to displace due to network effects. As such, I don't really see every business being a platform business, the failure rates are extremely high, especially early on. And I think it's okay, that not every business is a platform business. Although I suspect more and more businesses will need to engage with a number of platform businesses as part of their day to day operations. But the future for platform businesses that do survive is extremely bright. Again, once they reach that critical mass, they tend to take on a life of their own, and flourish basically, as SMEs and consumers find new and innovative ways to use their platform or the platform to transact.

Charmaine: So while it's not easy to get a platform up and running, the more users you attract, the better a platform performs. Naturally, to get the most possible users, platform businesses need to be able to attract people from all over the world.

Adam: Where possible, platform businesses should seek to be international from day one. Platform businesses are all about scale, the earlier you start trying to reach that critical mass, the better. And if you sort of cut yourself off to only one segment unnecessarily, then you're really just hindering your efforts to reach scale. You need to deeply understand your customers in the other markets, identify their barriers to commerce, you know, is it currency? Is it language? Is it local payment methods? What are the things that are stopping them from transacting and systematically eliminating those barriers. I would say that generally since payments are ubiquitous in ecommerce, payments tend to be a major barrier that requires early attention for a platform or marketplace business. You really need to sort that one out as fast as possible so that you can reach this international customer base as quickly as possible. My other advice, of course, is, and I mentioned this earlier, is not every business should be a platform business. Many businesses have attempted to transition their existing business model towards this model and failed. Platform businesses tend to operate on low margins, which means that existing businesses may struggle to accept the level of cannibalization needed to make the transition. And there's also an enormous amount of execution risk, which is often underestimated. So I'd say obviously, look carefully, you know, if you're an established business, be careful about making that transition. There is a big pot of gold at the end of the rainbow but there's also a lot of risk.

Charmaine: According to Adam, one of the great things about running an on-demand platform is that you will be constantly surprised and inspired by the innovative ways users interact with it.

Adam: So in terms of the platforms taking on a life of their own, they absolutely do. I mean, one of the things that you'll notice early on, when you run a platform business is you might think that you know how people are going to use your platform, but your customers will continually surprise you with the sort of new and innovative ways that they use it. For us, early on, a lot of this was around the skills, like I was particularly shocked at the breadth of work. I mean, in theory, we kind of knew what the breadth of work was, but at the time, the bulk of the web work was on web-related services, right. So things like designing websites, you know, building mobile apps, things like this. But what continually shocked me as an employee of of a platform business was just the breadth of work. There was all sorts of crazy things being done. You know, today, we're actually working with NASA at the moment, and they're getting genetic engineering analysis work done on our platform, for example, you know. Similarly, NASA have worked with us in the past on many other things, you know, designing radiation shields for satellites, things like this. Oftentimes, you start with a very sort of clear idea about what we'll have on the platform, then it just evolves. But again, you need to have this this sort of critical mass for that to occur.

Charmaine: It seems there are no limits to what platforms can achieve. Even space exploration is a possibility. In addition, platforms enjoy a unique relationship with their users, who will find new ways to utilize a service that the platform may not have thought of. But that constant innovation also means that these companies have to work hard to ensure their services keep up with customer demands.

Adam: A lot of it is just spending time in the platform itself. They talk about dogfooding. Basically, using your own product, we do a lot of that here at Freelancer. We do it every day, we're using our products for different things that we need done. And then on top of that, we're constantly looking through the data that we gather as part of our daily operation. For trends, we're looking for trends and patterns, and things that we can use. And sometimes, you know, a whole new area of business will kind of be born out of that. An example in Freelancer was we noticed over time that people would start using us for local related jobs, right. So what I mean by that is like jobs that require a specific location, like, deliver a package from X to Y, or go and paint a picture of me at a given location, or do some photography work for me, or something like this, we noticed that our platform was was being used for that. And then that led us to then go on to create some feature set and an entire experience around this particular type of work right and supporting it better. But people kind of did it, even when the support wasn't there from the platform. And there's many other areas where that happens today. And that guides a lot of our internal product development, you know, oftentimes just kind of looking at what our customers are doing, looking how they're using our product versus how we think they using our product, looking for the outliers and identifying well, maybe there's a potential business, sub-business there, or product idea there, or something similar. Our customers definitely continually surprise us, oftentimes in really positive ways, with the way they use the platform. They innovate in some ways more than we do with the usage.

Charmaine: Whether it's a request from the US space agency or a request for local services, customer expectations can change in unexpected ways. But as Adam explains, there's one change in customer behavior that he feels will have a long term impact on all types of businesses.

Adam: The biggest influence on consumer expectations, in my opinion, has really been the rise of mobile phones as the dominant method of accessing the internet and all the changes that's kind of brought along with it. I would say, you know, there's there's been a number of follow on trends. The one that comes to mind immediately is the trend towards instant gratification. And that the idea that you know, why should I have to wait to receive something? Why can't it just be processed instantaneously over the internet, the press of a button? In addition, because of this, I think consumers have become a lot less tolerant to sort of poor UX websites than they were in the past as well. If I'm using my phone to access something, it needs to be simple, easy to use, it needs to be fit within my phone screen. But it's more than that, right? Like it needs to respond to gestures. The images need to be high enough quality, like there's a whole bunch of factors that go into determining what makes a good mobile experience, beyond just does it fit within the screen. I think expectations are only going to continue to rise, as you know more and more and more things that you do in your day to day life go online. Why do I still receive paper letters? That's bizarre. Emails existed for so long, yet the government still mails me, the bank still mails me right? This seems insane. And I'm here, even at my age, that's the case. You know, I'm firmly in the millennial generation. I can only imagine what it's like for, you know, for someone younger than me who grew up in a world like that, right? If you're a teenager, during the rise of mobile phones, everything around your life revolves around your phone as your access point for literally everything, for payments, for dating, for online purchases, for transport. Everything revolves around your phone, like your phone is your access point, your key card for everything. And I think this trend is only going to continue.

Charmaine: One area where consumers already have high expectations is in the area of payments.

Adam: With the rising consumer expectations around ease of use, and UX, and using your phone for everything, it's come a dramatic change in the payments industry. All the clunky methods of payment that require filling out long forms of data or accessing multiple websites are rapidly falling out of favor, exchanged for quicker, easier, you know, one click style payment experiences and payment methods. You scan your credit card on your phone, you use Google Pay or Apple wallet, or there's a whole bunch of these styles of experiences, whereby true digitized one click style method of payment compared to the the old traditional way. And I think we're just going to see more and more of this moving on, moving forward, right, more and more trend towards how can I pay with my phone for that? And how can I pay with my phone for that in one click or two clicks, you know, not having to fill out a giant form and enter a 16 digit credit card number and so on, and so forth.

Charmaine: Adam's analysis is supported by data from the Adyen Retail Report. For example, 55% of APAC consumers like to have a selection of payment methods upon online checkout, while 28% expect retailers to offer one click checkout. But for smaller companies, there are huge barriers to offering the type of payment solutions consumers now expect. This is one area where platforms have an important role to play, explains Adyen's Romy.

Romy: So we want to be able to pay online, we want to be able to pay in stores, maybe we also want to be able to pay on our mobile, or even on a link via a chatbot. There's growing demand from consumers to have these incredible payment experiences. And once again, for smaller businesses, entrepreneurs, or even individual sellers, being able to keep up with those consumer expectations, when it comes to payments, is quite challenging. They need to potentially do multiple integrations, you know, they need to have sort of the payment expertise to be able to navigate that as well. And I think that's where platforms can add a lot of value, because they can say, "hey, I've got this one stop shop solution for you, where you can access all of the different sales channels that you need in order to run your business effectively."

Charmaine: So platforms make it easier for smaller merchants to offer a complete suite of payments. But to do this, platforms themselves must have a comprehensive payment strategy in place.

Romy: I think there's pretty much two main ways that they can offer payments. So the first one being a referral model. And the second one is a embedded payments solution. Depending on your platform business model, how much ownership you want to have over the user experience, and also how much you want to invest in that payment offering, you would usually go for one or the other. For the referral model, this is really when a platform decides to show a preferred list of payment service providers or as you like to say, PSPs, and then basically the user goes and sets up a separate account with that PSP. So the advantage of that setup would be that the platform can easily set up payments quite quickly, they can easily also start monetizing payments within their business model. The downside at times is that you don't have as much control over the user experience because you're basically referring your users to a third party. So that would sort of be the pros and cons of the referral model. For the second setup, which is embedded payments, this is really when a platform decides to take the payment service offering in-house. So they basically embedded deeply within their interface, and they still work with the PSP to power it in the backend with their technology and licenses. The advantage of that setup is really full control and flexibility over the type of payments experience that they want to offer their users. And also greater monetization options are also a foundational product for some other financial services that platforms will start to offer in the future. The downside at times can be that it does require a significant investment to make a proposition that their users would want. And then you also need to have a pretty clear product strategy and roadmap to make it happen.

Charmaine: At Adyen, we're seeing a growing number of platforms investing in embedded finance. But what is embedded finance? Here's Sophie Guibaud, co-author of "Embedded Finance: When Payments Become an Experience" to explain.

Sophie: Embedded finances really gives you the ability to brand and tech companies to offer financial services, including payments, lending, banking at the point of use of their users. So it's really like powerful, because it's really enabling you to serve the customers where they need it and when they need it the most, without them having to think about it.

Charmaine: So embedded finance is the integration of financial products within an existing platform. But for platforms considering this approach, how will it benefit their customers?

Sophie: Clients were taking like days, if not weeks, to open bank accounts to get started to do business. That just doesn't work. They were asked for business plan about like their shop coming up. And those guys, they are not into doing business plans and trying to create like full three years, cash flows projections to open a bank account, to just start selling what they are building. So let's say embedded finance providers are like brand and tech companies, they actually understand deep down the business and how they work. And like this predictability enables them to be much more competitive in terms of services, but also much more relevant, specifically when it comes to access to loans and financing, because they do understand the risk they are taking and they are really able to price accordingly, but also provide the service that is needed to actually enable the merchant to get access to capital when they need it to grow.

Charmaine: Embedded finance allows platforms to move from solving one financial pain point for their users – payments – to being able to solve multiple pain points by offering financial products such as business financing or a corporate credit card. And because platforms are already have such a deep understanding of their users' business, they are able to offer these products more quickly than banks. This makes the process of securing capital seamless and allows brands to grow and scale without worrying about cash flow.

Sophie: The experience is better because you are talking to some people that actually know your business platform, they have been working with hundreds, thousands, if not millions of users, so they are actually able to guide you along the way and to give you much more relevant experience and advice than would like banking people. They'll choose stories as well as they say that they provided a loan for a restaurant to hire a couple more employees. And like it's not something that is so easy to demonstrate to a bank that is not sitting on the data, right? I mean, the restaurant owner shares their increases in revenues and stuff like that. I mean, at the end of the day, they are not finance specialists, right. So are relying on a platform like grab that actually, as people that is managing data on a daily basis that is really able to get those insights better than you would present yourself.

Charmaine: The benefits of embedded finance for users are clear. While many platforms are still yet to start their embedded finance journey, Sophie believes the potential is huge.

Sophie: It's gonna be everywhere. Absolutely, no doubt about it. Like you have embedded finance kind of already. When you order something on Alexa, it's embedded finance right? BNPL (buy now, pay later) like has been also embedded finance. So I think we're early on, but I think it's everywhere. The future is already here. I mean, I guess you have seen Amazon, Google, or Amazon Fresh, the supermarket where you enter and you get everything you want and you don't queue and you get out and you have paid. That's how it's gonna be, right? It's gonna be everywhere. I have a conviction that we won't go back and the future is seamless payments.

Charmaine: The growth journey of every platform business may be different, but together they are revolutionizing the world of ecommerce in Asia Pacific and beyond. Whether they are a marketplace that connects buyers and sellers or an on demand platform that links gig economy workers with customers, for platforms to be successful, they need to quickly gain a critical mass of buyers and sellers, constantly upgrade their services to respond to users' changing demands, and offer seamless payments experiences. We hope you've enjoyed this episode of Behind the Figures. If you would like to learn about new trends driving the APAC customer experience or how Unified Commerce drives revenues and customer loyalty, check out the other episodes in the series.