Marketplace risk

Marketplace risk is a term used to describe the various threats an online marketplace may encounter in its operations. Left unchecked, these threats may hurt a marketplace’s ability to attract and retain users, provide a safe and reliable user experience, and operate as it was designed to do.

Frequently asked questions

What are some examples of marketplace risk?

Marketplace risk can take many forms, including:

  • Financial risk: Marketplaces facilitate transactions, which leaves them vulnerable to potential financial abuse. This includes threats that may harm users or the platform financially. Promo abuse, referral abuse, chargeback fraud, spoofed transactions, transaction fraud, and other forms of marketplace fraud all qualify as financial risk.
  • Compliance risk: If an online marketplace is subject to any form of regulation, failure to comply with those regulations may result in legal action against the company. Examples of marketplace regulations include the INFORM Consumers Act in the U.S. and DAC7 in the EU.
  • Operational risk: Any activity that hinders a marketplace’s ability to function as designed is considered an operational risk. Examples may include abusing the marketplace’s messaging system to spam other users, leaving fake reviews that make it difficult for others to evaluate products or services before completing a transaction, and posting fake product listings that result in a user being scammed. 
  • Privacy and security risk: In order to operate effectively, an online marketplace must collect certain information about its users. Some of this information — such as payment details and identity information — is extremely sensitive. This raises issues of privacy and security which must be controlled for.

How can businesses manage marketplace risk?

The first step in managing marketplace risk is to conduct a thorough risk assessment. This will help uncover various risks that your business is exposed to. Then, plans should be put in place to mitigate each of the identified risks. 

Risk mitigation will look different for each business. Common strategies include:

Ready to get started?

Get in touch or start exploring Persona today.