The marketplace model employed by traditional BNPLs like Afterpay is fast becoming the decade’s hottest business model.

The increasing proliferation of marketplace household brands across all industries – think UberEats, TripAdvisor, Amazon – are both driving and being driven by rapidly expanding consumer expectations.

Demands for hyper-convenience, mobile-centricity, speed, and an abundance of choice are now thoroughly ingrained in the customer experience.

This is an excellent outcome for consumers, and represents an irreversible advancement in service, convenience, and seamlessness. It’s a trend worth applauding, and one we don’t see disappearing any time soon.

As a result, however, certain industries are finding themselves increasingly pushed to integrate a variety of third-party marketplaces into their offering as digital channels to market. 

The retail industry in particular – with its current race to adapt to the major structural changes in the way we consume – is one in which the marketplace has become a critical point of competition. 

Retailers not yet offering the expanded standard of ecommerce and digital payments must now urgently catch up, or face potential impending irrelevance. Not on Amazon? Good luck with your sales figures. Don’t offer BNPL? Millennials will abandon you in a heartbeat.

And so retailers in particular have clamoured to attach themselves to marketplaces to avoid certain doom. Oh, and to access the associated business benefits too.

In that order.

Because the growing reliance retailers have on these marketplaces is steadily enlarging the burgeoning power imbalance between the retailers and the ‘big tech’ marketplaces. 

It means the choice to be on a marketplace is driven more by fear of the consequences of saying no, as opposed to the benefits of saying yes. And this pressure is being exacerbated by both the marketplaces and their consumer occupants. 

On the one hand, consumers who get a taste of the increased convenience and choice offered therein rarely turn back. This is the new norm, and why should they put up with anything less? It’s called progress, and it’s a broadly positive situation.

But on the other, the business models of rapidly scaling marketplaces are predicated on a near-constant acquisition of new partners and customers; a ruthless ‘land grab’ growth strategy driven by a relentless winner-takes-all mindset. 

As a result, retailers are increasingly sacrificing profit margins, distribution and quality control, and their direct customer relationships, all in return for taking a spot in the marketplace. 

But in the case of BNPL payment marketplaces in particular, it can mean sacrificing so much more. Because not all marketplaces are created equal. 

You’re going to be cheated on

Let’s use an example.

Imagine a marketplace BNPL provider (let’s call them “Laterpay”) approaches a sporting goods retailer (let’s call them “SportsCompany”). 

Laterpay promises to give SportsCompany “access to X number of sporting goods consumers” if it signs up to its payments platform. All of SportsCompany’s competitors are already on the platform, so it seems to make sense. And it might come at a margin of ~6 per cent per transaction, but given the promise of a veritable avalanche of new customers, it’s surely an overall win for SportsCompany. 


The problem lies in where Laterpay sources these X consumers from: the customers of SportsCompany’s competitors. 

Because while SportsCompany might experience a short-term hit of new revenue and new customer acquisition, this is all at the expense of other marketplace participants. And so it will only last until the next sporting goods store is approached, and suddenly it’s SportsCompany’s customers who are being used as the bait.

This will occur over and over again – almost like a reverse ponzi scheme – where new participants are “paid for” by old participants. And all the while, the power and leverage Laterpay holds over its growing portfolio of retailer customers steadily rises. 

The whole process is just as predictable as that person who cheats on their partner with you, and then – obviously – cheats on you in the future too.

It’s an unsustainable and predatory cycle of displacing customer relationships. And it’s retailers who have the most to lose. 

When their customers are directed away from the retailer’s website at the checkout, it’s now the BNPL that holds and nurtures this relationship. It can now use the customer buying behaviour and preferences data for its own gain, eroding the lifetime value (LTV) of the customer whose loyalty is now to the BNPL, not the merchant.

Unless the merchant does something about it.

The future of BNPL is in-house

Marketplace BNPLs have done a great job of educating consumers on this new, affordable, convenient, and simple means to pay for purchases. 

The option is now normalised and expected. And consumers should continue to demand options that are simple, convenient, and affordable.

However, it’s up to retailers to take back the power and find a solution that offers this exact same degree of customer value – without sacrificing customer relationships or diverting customers to competitors in the process.

Enhancing third-party marketplace BNPL models with a white labelled alternative would allow retailers to remain in control of the whole customer lifecycle, and avoid unnecessarily relinquishing customers to the likes of Afterpay at the checkout.

It’s a solution that captures all of the upside, for all of the parties, and none of the downside.

And in the process, retailers take back control of their customer relationships from the increasingly ‘big tech’ BNPL giants. 

Tim Dwyer is co-founder and CEO & Dan Peters is co-founder and chief revenue officer of Limepay.