You can have a fast and intuitive platform and even gather an active community. However, it all doesn’t count if you can’t securely accept and process payments. For marketplaces, the reliability of an online marketplace payment gateway equals the success of the platform.
Any type of marketplace – be it B2B, B2C, peer-to-peer, two-sided, or three-sided – handles a lot more financial operations. If you don’t have a safe payment online marketplace system to enable all these versatile transfers, your platform is done.
Benefits of using online marketplace payment solutions
- No mistakes. It’s easy to send a transfer to a wrong bank account, primarily if the platform operates with international banks. Firstly, the funds need to go to a particular bank account, then – to the main account of the company. During all these steps, you need to calculate multiple commissions and convert currencies. One mistake in confirming the operation – and the transfer won’t go through. For you, it means a lost client.
- No need to take responsibility for regulation compliance. An unreliable payment service creates an open door for hackers and thefts. If you accidentally leak your client’s data to a cybercriminal, you’ll be subject to funds.
- High compatibility. Ready-to-go payment solutions can be integrated with multiple development APIs; they have mobile versions and work on various screens and displays.
- Saving time for development and testing. When you integrate a ready solution with a direct pay online marketplace, you don’t need to ensure its performance quality, security, intuitiveness – the product developers do the work for you. You wouldn’t even need an in-house technical team – instead, it’s possible to outsource all development.
Factors for choosing a payment system
As you can already see, the provider of your payment system will be responsible for many things. Security, functionality, fast performance even during low latency, compatibility with different devices- all these factors can influence users’ willingness to make a payment.
Here’s a rundown of features that you want your direct pay online marketplace to have.
1. Know Your Customer
KYC is a practice of collecting data needed for financial transactions. You need to collect personal information and financial data. A user has to enter name, address, email, birth date, and more. Some systems also require a copy of an ID – this is relevant for platforms that handle expensive purchases, like real estate.
2. Safety
All payments for online marketplaces should be protected by SSL encryption and correspond to local or international data collection standards – that depends on the location of marketplaces’ community. Each country has a domestic KYC policy. So, is marketplace payment safe if you use a third-party tool? Usually, yes, but to know the details, check a Security section on integration’s website.
3. Taxpaying
When you are just starting, overlooking taxes is tempting. When your business is only growing, you have more significant worries on your mind. However, most owners totally forget about this critical aspect once they actually start making profits. In the end, you are left vulnerable to legal punishments and fines. Better make sure that your best payment solution for the online marketplace has a revenue-reporting feature – so you don’t have to do it manually.
4. Escrow services
You can’t rely on the honesty of your marketplace users all the time. Escrow services use the platform’s bank account as an intermediary for payments for online marketplaces. A buyer transfers money to the platform instead of handing them directly to the seller – that party only gets funds once the service was fully delivered.
The principle behind this is simple: if the seller is shady, you are the one with the money, and you can quickly return it to the buyer. However, if the money was transferred directly to a user, you no longer have a say – but your reputation will be stained nonetheless. So, choosing a payment online marketplace service with an escrow option is a must for an online marketplace payment gateway.
5. Multilingual interface
People might still be okay with browsing the marketplace on the language they don’t fully understand. But when it comes to carrying out payments, we all want to be in the loop. So, even if your platform doesn’t have multilingual support, make sure your payment system does. You want to make each detail clear.
6. System fee
One of the main downsides of using a ready payment system is that a solution requires a fee. Some work on a subscription basis. Others depend on the number of transactions, while some prefer commission. Find out which fee model your preferred system offers and calculate if it’s profitable for you.
7. Support for versatile payment methods
Typical payment options are bank transfers, card transfers, and online wallet support – PayPal, Stripe, Payoneer, etc.
The best payment systems for marketplaces
We picked the best three payment gateways that have all the characteristics described above. We focused on popular solutions because they are more accessible and comfortable to end clients. Among these three, you’ll definitely find the best payment solution for the online marketplace – we’ll help you to make the distinctions and figure out how does marketplace payment works.
PayPal
Marketplaces that use PayPal: eBay, Eventzilla
Using PayPal is typical for online stores, it’s less known among online marketplace payment systems. However, marketplaces are also jumping on board. After all, the platform is one of the only ones that can actually prove its impact on conversion. According to Nielsen’s report, platforms with PayPal get a 45% higher conversion.
Features
- Direct transfers from Paypal to bank accounts;
- Low online purchase fees;
- Versatile settings of credit limits;
- Escrow settings.
Advantages
- Fail-proof safety: Paypal blocks account immediately if there’s a security threat;
- Simple integration: the system has a responsive UI, custom integration tools also have GUI;
- Versatile plans: small businesses can opt for basic subscriptions which are almost free;
- You can connect Paypal to enable users to pay online on the Facebook marketplace.
Disadvantages
- Strict Terms of Service: Paypal moderation team can spontaneously decide to freeze your funds and prohibit operations if it looks like you aren’t complying with rules;
- Occasional 21-day waiting period: Paypal can find a problem in your transaction and put the money transfer on hold for three weeks.
iDEAL
Marketplaces that use iDeal: Etsy, Swappa
iDEAL is an Online Banking Payment method based on a four-corner model that generates a SEPA Credit Transfer from within the customers’ trusted online banking portal. With iDEAL, people can pay for their online purchases in a user-friendly, cost-efficient and protected way. Dealers receive real-time confirmations of the iDEAL payments which are guaranteed and irrevocable. Moreover, by applying to its partner, Online Payment Platform (or Online Betaalpha platform) it’s possible to significantly reduce fee per transaction (read below how Syndicode did this for HLPS marketplace).
Advantages
- Top-used: an absolute leader in the Netherlands
- iDeal fit for marketplaces: designed specifically as a payment system for marketplaces
- Wide partner base: enables the expansion of payment system options
- Speed: Real-time confirmation and payment guarantee
- Best-of-class reach: no sign-up for payers
- Conversion better than credit cards: integrated in trusted online and mobile banking
Disadvantages
- Clients need to have a particular bank account
- Withdrawals are not possible
- Transactions are not reversible
Stripe
Marketplaces that use Stripe: Lyft, Kickstarter
While Paypal is the most popular payment system worldwide, Stripe is definitely taking the lead as the most popular online marketplace payment method. The solution is specifically tailored to marketplaces and their needs. Stripe offers a variety of online marketplace payment systems, but the most popular one is Connect – so we’ll review this one.
Features
- Payer verification: Stripe is compliant with international KYC standards. Each user receives a verification code to the mobile funds, although some countries and fields need more information – Stripe will let you know.
- Legal compliance: Stirpe tracks your profit and reports taxes, checks cards in the blacklist, and screens untrustworthy payers;
- Adapted to mobile devices: Stripe integration has ready-to-go mobile interfaces, iOS and Android development kits, and adaptation for websites on mobile view;
- Supports direct transfers and online transactions.
Advantages
- Simplicity: Stripe’s API is simple to set up, connect, and maintain – you have a graphic interface to get you through the process;
- A physical POS device: you can process Stripe’s payments in physical stores;
- Open Source marketplace payment online plug-ins: you can customize functionality as your company scales – for free;
- Financial reporting: Stripe automatically compiles documentation.
Disadvantages
- Stripe doesn’t process Paypal transfers, which is vital because Paypal is still the most popular payment system;
- Price: Stripe is one of the most expensive payment services on the market.
Braintree
Marketplaces that use Braintree: Coursera, Uber, StackOverflow, Airbnb
Its main advantage is the versatility of accepted transfer methods: direct bank transfers, cards, Paypal, and other popular online wallets. Another advantage is its international penetration – the Braintree is already available in 40 countries.
Features
- Many marketplace payment online tools to choose from: along with Braintree Marketplace, you can consider Braintree Direct, Extend, and Auth – they offer different pricing and scaling opportunities;
- 3D2 Secure protection: an algorithm for verifying cards and transactions with limited data, so less time needed for checkout and you don’t hold as much responsibility for the data;
- Payout support: Braintree partnered Hyperwallet, Paypal-owned services for B2B transactions.
Advantages
- Universality: Braintree belongs to the Paypal family, which is why it’s compatible with most of Paypal’s tools;
- Supports local payments: international businesses can use local banks to transfer or receive money to another country;
- Reliable support: you can contact agents personally or take a look at the Development Docs.
Disadvantages
- Complicated implementation: Braintree is harder to install because there are a lot of required customizations.
Marketplace Payment Insight from Syndicode
Recently, while developing the two-sided marketplace platform for the HLPRS company in the Netherlands, we also faced the need to choose a payment system. HLPRS connects service providers – cleaners, gardeners, babysitters and handyman with clients via the platform.
Thus, the interaction between service providers and clients had to be supported by a payment system that allowed fee minimization for transactions with different budgets.
We chose to use Online Payment Platform (or Online BetaAlpha Platform), a partner of the iDeal system, which was a great fit for HLPRS. As one of the leading payment systems for online marketplaces in the Netherlands, it had all the necessary components and integrations for making payments.
Using OBP, Syndicode managed to add value with the minimization of expenses on the payment system in 4 times. This service has the lowest rates, and Syndicode wrote a system for integrating it into the marketplace for HLPRS.
Conclusions
The final choice of an online marketplace payment method boils down to the characteristics of your platform.
If you have a small marketplace that’s only starting to bring profit, Paypal is the best option. For small businesses, it’s always free, easy to implement, and support.
If you build a custom two-sided marketplace, especially in Europe, consider Online Payment Platform which allows for drastic significant minimization of the transaction fee.
For big international marketplaces with versatile fee systems, Stripe is the way to go. It’s highly secure, simple, transparent, and globally-friendly. Most importantly, it has many features designed specifically for marketplaces, pre-set functionality templates, and report files.
For medium businesses that rely on Paypal tools, Braintree is the best alternative. It’s also a medium option in terms of price, perfect for a growing SMB.
If you are building a marketplace, you need to think of its financial system, fees, and payment systems from the start. Syndicode knows about it because marketplaces are kind of our specialty – we’ve built dozens of them all over the world. Contact our developers to look at your concept, we’d be happy to.