Fintech-enabled marketplaces
The future of marketplaces part 1
September 2021
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Investing in the future of marketplaces.
Adevinta Ventures is the VC arm of the Adevinta
group, a global online classifieds specialist
operating leading digital marketplaces in 16
countries. We invest in fast- growing European
startups (Series A and B rounds) that can shape
the future of mobility, real estate, work and
fintech. We also foster collaboration
opportunities between our portfolio companies
and Adevinta brands.
Game-changing support for early-stage
tech founders.
Speedinvest is a European venture capital fund
with more than €500M AUM and 40 investors
working from Berlin, London, Munich, Paris,
Vienna and San Francisco. Our sector-focused
investment teams fund innovative early-stage
technology startups in the areas of Consumer
Tech, Deep Tech, Digital Health, Fintech,
Industrial Tech, Marketplaces, and SaaS.
Global startup & venture capital
intelligence platform.
Dealroom.co is the foremost data provider on startup,
early-stage and growth company ecosystems in
Europe and around the globe.
Founded in Amsterdam in 2013, we now work with
many of the world's most prominent investors,
entrepreneurs and government organizations to
provide transparency, analysis and insights on
venture capital activity.
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Previous reports.
The future of marketplaces 2021
Online marketplaces 2020
The future of online marketplaces 2018
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Why this report.
Source: eMarketer January 2021
Consumer spending is
increasingly online, with
huge room for continued
growth.
Fintechs are taking a cut of
marketplaces success.
Newer markets offer even
bigger growth
opportunities for both
marketplaces and fintechs.
The lines between
marketplaces and fintechs
are looking increasingly
blurred.
Online marketplaces are
increasing taking advantage of
both “plug and play” embedded
fintech solutions, and fintech
products built in house, to
create new monetization
streams, improve user
experience, and boost customer
retention. This report explores
this new trend.
Un- and underbanked
populations in rapidly growing
and digitizing markets offer a
huge growth area for both online
marketplaces and fintechs.
Fintech solutions are
capitalising on online
consumer spending, through
payments commission, Buy
Now Pay Later interest, escrow
and other services. With
payment momentum moving
from legacy banks to fintech
solutions.
Online marketplaces sales now
account for 19.5% of all
consumer spending, vs. 18%
last year and 13.6% two years
ago*. While this has been
accelerated by the pandemic, it
is a trend that was already well
underway, and will continue to
grow.
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Key takeaways.
●
Financial services + online marketplaces = outsized returns.
Fintech-enabled marketplaces have EV/Sales 6.7x, compared to 5.3x and 4.6x for other
marketplaces and financial services, respectively.
● Record investment in online marketplaces (€78B in 2021YTD) means that marketplaces have
significant dry powder available to invest in building or acquiring new financial services
in-house.
●
Fintech-enablement has been validated by soaring valuations of fintech products aimed at
marketplaces (e.g. Buy Now Pay Later), and in addition, huge potential remains in serving un-
and underbanked global communities.
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Where are we in the
evolution of
marketplaces?
The first generation of online marketplaces
translated town squares and bulletin boards
into eBay and Craigslist. A recognisable
online migration. But marketplaces have
evolved more in the last 20 years than in the
previous 200.
The initial wave of marketplaces from the
2000s tended to be supply-driven and
vertically focused. The next wave of
marketplaces enabled the transaction to take
place on the platform. In the 2010s,
marketplaces became on-demand,
location-based and almost fully managed by
the operator to improve the user experience.
Today, we are at a time of abundance of
capital, e-commerce adoption and millions of
unbanked consumers in growth markets. The
next generation of online marketplaces
embed financial services to create a better
value for the customer, increase retention
and monetization.
We have covered the evolution of
marketplaces in more detail in past reports.
New models
New
models?
Managed
marketplaces
On-demand
Transactional
Vertical
specialists
Supply
aggregators
1990s
2000s
2005-2010
2010-2015
2015-2020
2021+

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Marketplaces are embedding financial products to combine the power of fintech
and the reach of online marketplaces to compound growth opportunities.
Online
marketplaces
Financial
services
Fintech-enabled marketplaces
✔ Expanding total addressable market
✔ New and recurring revenue streams
✔ Lower Customer Acquisition Costs
✔ Sustainable unit economics
✔ Reduce friction at order
Create demand
Listing & curation
Transaction
Logistics
Inventory risk
Product-market risk
Insurance
Escrow
Financing
Loans
Payments
Payroll
“
Marketplaces relentlessly evolve to
improve the user experiences and
economics for the demand side, the
supply sides as well as the core
marketplace itself.
Embedding financial services within new digital marketplaces, presents an exciting
frontier where operators are potentially able to launch breakthrough product
experiences that can significantly reduce friction, increase liquidity and capture new
economics.
Pete Flint
General Partner,
NFX
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Marketplaces that embed financial services build more shareholder value.
Online marketplaces
Median EV/Sales 5.3x
Financial services
Median EV/Sales 4.6x
Fintech-enabled
marketplaces
Median EV/Sales 6.7x
Source: Dealroom.co analysis of company filings as of August 2021.
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Record amounts of funding enable marketplaces to invest and launch in-house
financial services.
Global VC investment in marketplaces by year
Notable funding rounds in 2021
$3.6B Growth Equity
$2.0B Growth Equity
€600M Late VC
€450M Series F
€1.2B Growth Equity
$1.3B Late VC
$1.2B Series B
$500M Series F
$485M Series D
2016
2017
2018
2019
2020
2021 YTD
€20.0B
€40.0B
€60.0B
€49.7B
€29.9B
€78B
€17.4B
€12.7B
€9.4B
€55B
€59B
€67B
€59B
€51B
Source: Dealroom.co
Some marketplaces have invested in building
their own fintech products in-house.
Payments
Lending
Insurance
Cash
Amazon
Shopify
Jumia
MercadoLibre
Investments, strategic acquisitions and in-house products
capital
Marketplace operators develop financial
services products in-house to strengthen its
core ecosystem (e.g. Amazon, Shopify),
increase financial inclusion and extend
payment infrastructure to third parties to
collect consumer data (e.g. Jumia,
MercadoLibre).
Starting with MercadoLibre (marketplace) the
team has built an ecosystem, adding
payment solutions (MercadoPago), logistics
(MercadoEnvíos), financing
(MercadoCredito), advertising for sellers and
publishers (MercadoAds ) and software to
help offline businesses digitize and have an
online shop (MercadoShops). Also, Mercado
Pago already represents 50% of the company
value in terms of revenue generated and
transactions.
Shopify uses its merchant solutions (mainly
payments) to drive higher retention for its
core subscription product.
Developing financial services product
in-house is expensive and time-consuming
(e.g. build compliance, credit risk,
anti-money laundering teams from scratch).
Page / 11 Source: Dealroom.co
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While other marketplaces partner with third-party fintech startups, to control
and improve the user experience at lower initial costs.
Asset light marketplaces
Software directly competing with
Amazon’s platform. Includes
financial services (e.g. payments).
Creating
demand
Listing and
curation
Insurance
Underwriting / Financing
Logistics
Manufacturing
Software
Payments
Embedded financial products
Buy now pay later
Banking
Credit scoring
Know Your Customer
Source: Dealroom.co
“
The acceleration in the shift to online
retail has been partly enabled
through the increased integration of
financial products and services”.
This has been particularly true for higher value transactions like cars, where offering
financial services with instant decisioning as part of the checkout process has
materially increased the addressable market.
Alex Chesterman
Founder & CEO,
Cazoo
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Financial integration can generate unexpected new revenue streams.
Flight-booking startup Hopper now outsource their own finance product.
How it started
Recent past and current
In the future
Founded in 2008 in Montreal by former Expedia
employees.
Hopper started as a travel search product. It
accumulated vast amounts of data and applied
machine learning to make recommendations to
customers.
In 2019, Hooper introduced a financial product
“Price Freeze” that now accounts for 30% of total
transactions.
In 2020, revenues grew 100% year-over-year.
Demographics (customer base tilted towards
millennials and gen Z) and financial services
contributed to that.
Become financial services company
Launched Hopper Cloud, a B2B offering of its
machine learning algorithm
Holds risk on its own P&L
Source: Dealroom.co analysis of company filings and Hopper’s founder interview
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Lending: Shopify sustains merchants’ activities and strengthens its core
subscription business through finance products.
+22x
+8x

$189M
$310M
$465M
$642M
$909M
2017
2016
2015
2018
2019
2020
$112M
$201M
$363M
$608M
$936M
$2.1B
$93M
Shopify revenue by segment
▊ Subscription solutions
▊ Merchant solutions (mainly Payments)
H1
2020
H1
2021
H1
2020
H1
2021
Gross Payments Volume
Merchant Cash Advances
& Loans
Growth since
2015
$205M
$390M
$673M
$1.1B
$1.6B
$3.0B
$20B
$37B
$166M
$415M
Merchant solutions select figures
+1.8x
+2.5x
Source: Dealroom.co analysis of company filings
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Fintech outpacing marketplace, collecting third party data enables to enhance
consumer experience
$9.6B
$11B
$13B
$20B
2017
2016
2018
2019
2020
$5.6B
$4.1B
$7.2B
$15B
$30B
$2.1B
Payment volume of Mercado Pago
▊ Own marketplace
▊ Third-party marketplaces
Revenue of MercadoLibre by stream
$0.4B
$0.6B
$0.9B
$1.4B
2017
2016
2018
2019
2020
$0.2B
$0.9B
$0.8B
$1.3B
$2.6B
$0.6B
▊ Fintech
▊ Marketplace
$0.8B
$1.3B
$1.4B
$2.2B
$4.0B
$7.7B
$14B
$18B
$28B
$50B
+4.3x
+7x
Growth since
2015
+14x
+3.5x
Growth since
2015
Source: Dealroom.co analysis of company filings
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Jumia, a leading marketplace in Africa,
launched digital payment platform,
JumiaPay, that shows strong adoption.
“E-commerce marketplaces are very
powerful engines to drive payments.
Everywhere in the world, some of the
leading payment companies were
born out of and grown by
marketplaces”
- in Quartz
H1
2020
H1
2021
H1
2020
H1
2021
Total payment volume
Total payment volume as
% of GMV
Sacha Poignonnec
CEO, Jumia
$128M
$116M
24%
31%
+1.1x
+1.3x
Source: Dealroom.co analysis of company filings
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Soaring Buy Now Pay Later startup valuations are validating the new payment
model in partnership with marketplaces.
2019
2020
2021
2019
2020
2021
2019
2020
2021
Market capitalization of leading Buy-Now-Pay-Later companies
$5.5B
$11B
$46B
$2.9B
$5.0B
$17B
$6.8B
$16B
$28B
Select clients
✓ Consumer data
✓ Recurring revenue
✓ Growing sales
Source: Dealroom.co analysis of GoogleFinance data.

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Insurance for freelancers, job
contractors and gig economy
Banking for
Minorities
Banking for
farmers
In South East Asia, 50% of consumers are
unbanked; another 20% are underbanked.
70% of SME merchants accept only cash in
2019. This has resulted in huge super apps
that integrate fintech with marketplaces,
such as Gojek, Grab, Flipkart, Paytm and
Ant Group.
But there are also plenty of underbanked and
poorly banked market segments in the U.S., Latin
America and Europe, too.
In the U.S. 42% of B2B payments are still made by paper cheque(1). A huge
opportunity for fintech enabled services. Fintech innovation can remove
friction and improve quality. In the EU, close to 40 million citizens are outside
the banking mainstream. In Mexico, only 37% of adults have a bank account
and about 90% of transactions are in cash.
Moreover, many market segments are poorly banked; think of freelancers,
early entrepreneurs, creatives, eco farmers.
In Asia, embedded finance is
very common, also due to a
large un- and underbanked
population.
*Valued at $320B prior to the regulatory clampdown since late 2020
(1) Association for Financial Professionals 2019 Survey
Banking for
freelancers
and founders
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Financial solutions massively extend the value added in the process of matching
supply and demand.
Search
Social
On-demand/
location based
Loans
Subscription plans
Income Sharing Agreements
Fractional ownership
Escrow
iBuying
Payments
Insurance
Payroll
Banking
Discovery
Financing
Buying
Post-transaction
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Marketplaces are increasingly providing financing for both buyers and sellers, to
reduce transaction friction and add revenue streams.
Provide mortgage to buy home
Income sharing agreements *
Rent-to-own a property
Car subscription/lease plans
Payslip advance to freelancers
Buy now pay later eCommerce
Pre-paying the seller
* No tuition fee, platform gets % of income if student gets job
Shared equity
Buy-to-rent (...)
Discovery
Financing
Buying
Post transaction
“
Hans Christ
CEO, Bipi
Mobility and how we access cars is
changing at the speed of light.”
“Before COVID 99 % of cars were bought and transacted in a physical place, today
there are many players offering a full transactional and digital experience to access a
car as easy as buying a pair of jeans online. Car Subscriptions is the best example with a
100 % online experience with everything bundled and included in the price
(Insurance, maintenance, taxes etc).
In the next 5 years more than 30 % of car transactions will be online with everything
included. Marketplaces like Bipi that control the supply, pricing and user experience
are able to offer a bundle for the same monthly price are poised to succeed in the near
and long term.”
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Enabling the transaction: remove friction to increase conversion.
Provide escrow services for cars and
real estate
Provide escrow services for luxury
items
Offers instant buying to seller
Customized payment infrastructure to
facilitate transactions in cash and
multiple currencies.
Built global payment infrastructure to
help hosts/traveler book with ease
Discovery
Financing
Buying
Post transaction
“
“We have recently expanded our offering beyond the pure instant home buying
business to include sale and leaseback and rent-to-own products. These new products
have really helped us to bring our customers more flexibility and better experience
resulting our business to grow 5x during the past two quarters.”
Kalle Salmi
CEO, Kodit
At Kodit we are big believers in
vertical integration of the real estate
product stack and see huge
opportunities to add more financing
products into our offering.”
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Post transaction: extend customer relationship and thus lifetime value.
Provide third party insurance at the
time of purchase
Bundles insurance
Handles payroll to speed up payout
(and therefore satisfaction and
liquidity)
Issue co-branded credit/debit card to
offer rewards and cash-back for
marketplace participants. Eventually
will speed-up payout and transaction.
Discovery
Financing
Buying
Post transaction
“True customer-centricity happens
when we can be seconds away from
the moment when it is most
convenient to buy.”
That is why embedded insurance is a growing trend for both new and well-established
marketplaces. While financing services have found multiple entry points to work with
marketplaces, the insurtech industry has just opened the door to this possibility. At Lovys,
we partner with strong commercial players including leading marketplace brands to offer
our 100% digital and flexible insurance solutions in the home, cars, electronics and pets
categories to end users. We have been seeing strong growth in this B2B2C channel,
confirming the strong user need for embedded insurance products.
Joao Cardoso De
Jesus
Founder & CEO, Lovys
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