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.
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.
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.
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.
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.
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.
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.
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.
Typical payment options are bank transfers, card transfers, and online wallet support – PayPal, Stripe, Payoneer, etc.
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.
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.
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).
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.
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.
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.
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.