Online Marketplace Payments: How to Choose the Best Payment Provider for Your Buy-and-Sell Platform

Online Marketplace Payments: How to Choose the Best Payment Provider for Your Buy-and-Sell Platform

There are numerous features (from must-keep to nice-to-have) an online marketplace needs from a payment gateway. 

Choosing a marketplace payment provider requires entrepreneurs to cut through all available objective data and recognize the right PSP in their specific business circumstances.  

In this blog, we’ll take you through

  1. the marketplace transaction flow
  2. receiving Stripe payouts in restricted countries with Bitcoin Wallet
  3. marketplace payments
  4. integrating crypto payment system to your marketplace

...in order to help you answer the question: What payment service provider is the best in your particular situation? 

Plan your budget before starting development on a marketplace


What is the marketplace transaction flow?

In the marketplace context, transaction flow can be defined as a purchase or barter between provider and customer. We’ll pay attention to the value exchanges which include money. 

Simply put, the whole billing process may be split into 3 steps:

  1. a client submits payment
  2. money is moved to the seller
  3. two-sided reviews

However, the inside is literally more complicated than it seems. 

First of all, the host doesn’t get the money once a buyer makes a payment. Instead, the marketplace, via a PSP, acts as a trusted middleman and only distributes the money to the seller once the ordered item has been shipped to a client successfully. The marketplace also doesn't distribute the entire payment amount to the host, but first deducts a commission, which forms its revenue stream.

To understand the process clearly, we’ll look at our portfolio case as an example. It is a P2P marketplace that connects travelers with shoppers and allows users to discover and purchase rare collectible items even from the most secluded parts of the world.





Receiving Stripe payouts in restricted countries with Bitcoin Wallet

One of our main tasks was allowing payouts all over the world, which has been realized through the alliance of Stripe and Bitcoin wallet.

The transaction process within the travel marketplace requires previous registration and sign-in. Once a buyer is logged in, he is navigated to the checkout page. The user needs to fill out all the mandatory fields, including credit card details and a shipping address. Then a request is sent to a seller of the chosen item to review it and allow or decline a purchase.

In the second case, the money will be transferred automatically via the platform to the seller's Stripe account.

To cover a wider audience, involving sellers who live in a country where Stripe payments are not supported, we enabled payouts via Bitcoin Wallet. To receive money, the seller provides his Bitcoin address, then the platform's admin exchanges the money into cryptocurrency and sends it to the seller's BTC address.

By means of this integration, a platform supports financial transactions across as many countries as possible.

In addition, here’s what makes this travel marketplace unique:

  • browsing for items using GPS capabilities
  • no investment required with the pre-sell model
  • verified buyers and sellers support
  • integrated Bitcoin payments
  • buying from small business owners in remote locations

To know more about other online marketplaces we’ve built, look through the following blogs:

  1. Markid: a marketplace for buying and selling kids’ items
  2. BOPIS (buy-online-pick-up-in-store) marketplace
  3. Horse Deal: a marketplace for buying and renting horses 
  4. TutorHouse: an eLearning P2P marketplace 

Stripe, MANGOPAY, and Adyen offer a "white label" process, meanwhile PayPal keeps users aware that they have to create an account within the PSP directly.

Marketplace payments: integration, features, fees, and more things to consider

Since buy-and-sell marketplace development is a quite complex, multi-layered process, we have to critically evaluate payment service providers from different perspectives. 

If you’re planning to launch a convenient and efficient online marketplace - focus on delivering hassle-free transaction processes, offering more value, and ensuring checkout security. 

Picking up a fast, easy-to-use and secure payment solution will help you to reach a wide audience and attract more clients, bringing you higher profit.

In this chapter, we’ll examine the most critical factors you should consider when deciding on your go-to PSP and comparing payment processors. 

Collecting customer private information

For paying out funds to individuals and companies, the KYC (know-your-customers) process usually entails collecting specific information about each individual or company receiving payments and verifying this data.

In most cases, the collected information includes name, date of birth, address, ID verification, and other legal documents. 

As for user experience, this stage causes a challenge for payment enablers. PSP should provide a tool for automating the KYC process, making it easier and less time-consuming to decrease user abandonment rate.   

The approaches PSP holds KYC process may be two-folded:

  1. White-label strategy

...which means the user inputs their data through a user interface provided by the marketplace on its behalf and a user account to the PSP is created for them automatically, even without notifying users that a Stripe account has been created for them. 

As for benefits, the billing process is quite smooth, quick, and user-friendly: they have simply provided their credit card details and other personal information and then started to receive money directly to their bank account.

Stripe, MANGOPAY, and Adyen offer a "white label" process. 

  1. Direct strategy

Meanwhile, PayPal keeps users aware that they interact with PayPal and there is a need to create an account to receive money. 

For streamlining the process, PSPs offer special tools to input users’ data, nevertheless, this approach could cause some concerns about information security. 

That said, it stays on behalf of the marketplace to convince people their payments are processed securely within a platform. The choice of a payment service provider can seriously affect customer retention in various ways, so pay attention to its digital reputation to give users a sense of safety. 

Splitting payments between stakeholders

Depending on the business model, the payment made by a customer may be split into several parts. For example, it goes to a seller and marketplace that charges its commission as well, and a small cut is taken by a PSP, as a fee. 

Although, you may be surprised to learn that some payment service providers do not support splitting payment between multiple parties. The problem turns out to be even more complicated when it comes to the multi-vendor shopping cart, where a customer purchases items from multiple providers during a single checkout. 

All payment gateways overviewed in this article provide the ability to split payments between at least two parties. So choosing one of them as your go-to payment service provider, you’ll not be tempted to screw over transferring all revenue to your own bank account and manually paying your resellers on a monthly basis.

Fraud detection and chargebacks 

When negotiating PSPs, it’s highly recommended to learn what disputes are, how the process works, and how to prevent them from happening.

A dispute (also known as a chargeback, inquiry, or retrieval) takes place when a cardholder creates a complaint to the credit card company after purchasing a product or a service. In fact, a dispute is nothing more than a request for more information about the charge. 

In most cases, it may escalate to a chargeback, since credit card companies take the side of the customer, return the money, and charge it from the provider. This exact fact puts many online marketplaces in trouble: dishonest customers open disputes even though they have received the product or service they purchased. 

Disputes are an unpleasant aspect of accepting payments online and the best way to manage them is to prevent them from happening at all through an effective dispute and fraud prevention strategy. 

Escrow and delayed payout

To guarantee the safety of transactions within your marketplace you shouldn’t immediately transfer the money paid by a customer to the seller. Instead, the payment may be delayed and held by a PSP for a while after a customer has made it. 

This process is referred to as escrow - a contractual arrangement in which a third agent receives and disburses money or property for the primary transacting parties, with the disbursement dependent on conditions, agreed to by the transacting parties.

Holding money on behalf of the third-party solution requires them to get a special license for offering escrow. That said, it’s much easier for online marketplaces to turn to payment service providers with escrow-like functionality than earn the certification on their own. 

Audience targeting

Probably, the most critical pre-developmental step is making sure your target audience is supported by a chosen payment provider.

Every single country poses its own regulations regarding online payments. Therefore, no PSP can cover all countries, so it forces marketplace owners to focus on the regions they’re targeting. 

Simply put, you have to find out if your payment service provider

  • supports payouts to bank accounts in the countries you want to support 
  • can handle payments in the currencies of the countries in question 
  • is able to support the most important payment methods in those countries. 

For instance, PayPal serves a large number of countries and 26 currencies, while some of them are supported only for local payments.   

Unlike PayPal, Stripe prefers a completely different strategy, offering more than 100 currencies, but only 43 countries. 

Mangopay allows to process payments in 100+ countries but only supports 11 currencies.

Integrating crypto payment system into your marketplace

The justified buzz around cryptocurrency has been triggered by the rapid growth of its popularity within both B2B and B2C market segments. 

Through the openness of the eCommerce sector to new technologies and innovations, crypto payments revealed very tangible advantages they provide to buyers and sellers alike.

Given the overall number of bitcoin wallet users is growing steadily, marketplace owners are highly recommended to pay close attention to the strong underlying public interest in this emerging technology.

The reasons that users need various ways to pay online are diverse and complex - but the integration of innovative cryptocurrency payment into your traditional marketplace can offer a stable solution to a range of concerns and requests that customers may bear in mind.

That said, you have to enable a variety of options - from cryptocurrency payments to credit cards for digital transactions in numerous currencies - to deliver a seamless shopping experience and retain the audience. 

Though Stripe does not support cryptocurrencies, it is still possible to empower your marketplace with this functionality. 

Are Stripe payouts compatible with Bitcoin Wallets?

And the short answer is - yes. 

There are numerous ways of how to make payouts in a cryptocurrency, despite ending Bitcoin support within Stripe. In this blog, we just showcased one of them. 

Our primary goal was to widen the audience of a P2P marketplace for travelers in the most cost-effective manner.

In case you’re looking for help with enabling crypto payments in your marketplace, don’t hesitate to contact our tech specialists. After discussing your project and analyzing your requirements, they will suggest the most effective way of their realization.  

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