What if Vinted became a bank? The marketplace is exploring a new way to manage payments

Born as a small marketplace for reselling used clothes, over the years Vinted has become a heavyweight in the category, so much so that it's unclear whether the company best rode the wave of the secondhand fashion trend or whether it helped turn secondhand into a cultural phenomenon. The fact is that, in its simplicity, the Vinted system continues to grow, often at speeds exceeding those of traditional fashion.

As explained by Vogue Business, in 2024 alone, the app recorded a 330% increase in net profits, reaching a turnover of 76.7 million euros. By expanding the categories of sellable products and equipping itself with a verification system for the most exclusive luxury goods, Vinted has become a sort of true bazaar where you can buy practically anything, from clothes to electronics, home items to books. And if many were already using the money accumulated in their balance as a “wallet” to shop on the app, now Vinted has decided to equip itself with its own internal payment system: Vinted Pay.

Why a payment system now?

The idea behind creating an internal digital wallet and a payment service that allows transactions directly in the app is not only to make the user experience smoother but also to reduce the fees that the company pays to external providers. Behind it there is also a hope for profit: while the margins of pure resale, i.e., the company's core business, hover around 30%, those of payment platforms are double or triple, between 60% and 90%.

Increasing margins beyond its core business but with a service, such as payment management, serves to realize the company's growth projects. During a panel at the Web Summit in London, senior brand manager Andrew Smith explained that the company has always wanted to expand into numerous and varied product categories to create what in economics is called "network effect": more users enter, more products there are, more people want to enter, and so on.

When the platform reaches sufficiently large dimensions, the costs of servers, marketing, and customer service should decrease, increasing margins and allowing the company to achieve economies of scale. According to Smith, for secondhand to become people's first choice worldwide, Vinted must become huge and dominant. A bit like a bank, indeed. Currently, however, tests are still being carried out only in selected European countries and the app will continue to work with its current payment partners.

The decision to develop an internal payment method also corresponds to the app's entry into the United States market with the first tests of inter-continental shipping through which selected users in the United Kingdom could buy and sell with users in limited areas of the USA, initially concentrated in New York, New Jersey, and Connecticut. The intention was to conduct a sort of trial to assess interest, test the functioning of international logistics, shipments, and customs.

In which fields is Vinted expanding?

The diversification of revenue sources is a strategy that the app has followed for several years. In 2022   Vinted Go was established, a logistics subsidiary that offers low-cost shipments for users in France, the Benelux countries, and also in Spain and Portugal. But Vinted Pay's ambitions are high: a job posting published by the company spoke of creating «a global, revenue-generating, multi-service financial platform. In practice, Europe's largest fintech».

The success of resale platforms depends on the ability to pay sellers reliably and quickly, and therefore Vinted Pay aims first and foremost to improve payments to sellers by managing them internally. Thanks to the wallet, the mechanism mentioned above—keeping earnings on the platform and using them to make purchases, thus reducing the processing fees paid by Vinted to external providers—will become an official feature.

In fact, even when using one's existing balance to pay for a new purchase, the app still processes the payment through an external provider, paying a mini-fee. The ideal continuation of the introduction of Vinted Pay could allow—and this is our hypothesis—faster payments, perhaps the development of small interests on the balance held in the app, promotions for those who keep money in the wallet, and even integrations with financial services such as the issuance of credit cards, options to transfer the balance into a "piggy bank" with yield, or even mini-loans or installment plans directly in the app. The possibilities are truly endless.

Takeaways

- Born as a simple marketplace for used clothes, Vinted has become a giant in the secondhand sector, helping transform it into a true cultural phenomenon and often growing faster than traditional fashion.

- In 2024, the company recorded a 330% increase in net profits, reaching 76.7 million euros, thanks also to the expansion into new product categories and verification for luxury items.

- With the introduction of Vinted Pay, the company aims to reduce the fees paid to external providers and capture the much higher margins of the payments sector (60-90%), compared to those of resale (around 30%).

- Vinted’s strategy is based on network effects, economies of scale, and diversification (logistics with Vinted Go, entry into the USA, fintech ambitions), with the goal of becoming globally dominant and making secondhand the first choice for millions of people.