Posted on: 26 05 2020

How to choose your marketplace payment methods

Written by
Mark de Vos
Reading time: 5 mins

Marketplaces have been popping up everywhere and are, so it seems, to be creating a new type of economy. They require a specific payment methodology implementation, due to having to deal with moving funds between buyers and sellers, while also having to be able to take a commission for the marketplace. Let us explore the options on the market right now, and discover what to pay attention to when selecting a marketplace payment methodology.

Not all service payment providers (PSPs) offer marketplace solutions. There are extra features necessary to make a marketplace payment methodology work, and even then it still depends whether it works for your specific business case. The standard features that at needed at the bare-minimum are:

  • KYC (Know your customer)
  • Splitting payments
  • Delay a payout or escrow like service

Know your customer

The KYC process is mandatory in most countries when paying out to individuals or companies. The regulation may differ, but it typically consists of gathering specific information on the party receiving the payment. This may sound like a large obstacle for your customers to overcome, but luckily many PSP’s offer automated KYC processes via API’s. Customers don't need to leave your environment as additional information is requested when they create an account. The rest is automated, and often the customer is unaware of the KYC process going on in the background.

Examples of payment providers who offer this are Adyen, Lemonway, Mangopay, Stripe or online payment platform.

Splitting payments

This feature is key to make the initial business case work. The buyer pays a sum but that needs to be split into at least 2 ways — part to the marketplace as a commission and the rest to the merchant, the service provider.

We often receive questions about holding the sum as a marketplace first yourself, but this can create liability problems and is in many cases illegal. Holding money on behalf of providers not directly employed by you requires a license which is difficult to get hold of.

If could also be that you need to pay to multiple merchants which means the payment needs to be split in even more payouts. An example could be when several providers offer a unified solution or with referral programs. Most PSP’s that offer marketplace solutions offer multiple payout options.

Delay a payout or escrow like service

As you can imagine, there can be a need to delay a payout because the product or service will be delivered at a later stage. This means the money needs to sit somewhere until the delivery is fulfilled, which may be referred to as an escrow service. Escrow requires specific licenses which we will not go into here, but escrow-like services can be provided by PSP’s. Of course, there are PSP’s who have obtained these licenses and can officially call their system escrow, however for a marketplace solution this often does not really matter.


Depending on your business it is important to understand who has control over the funds during this delay, is it the buyer or is the marketplace? It really depends on what kind of service you are offering and how involved you are as a marketplace between the buyer and merchant coming to a deal. Think of scenarios where a buyer and provider need to come together for an appointment, but one of the parties fails to attend. In this case there is probably an expectation to be compensated in a certain way, for which your PSP would need to offer a technical solution. Control of funds during the delay can therefore be an important factor, and changing the normal payout configuration would require manual intervention. These options need to be reviewed whether they can be provided by the PSP.

KYC and escrow like service

An important factor to consider here is the combination of the KYC and an escrow-like service. Some PSP’s need to know who the payments will go the moment a buyer is paying. In some cases this is straightforward, for example with Airbnb who know hosts in advance. However, this is not always the case, and the merchant remains unknown at the moment of purchase. An example here could be a marketplace which allows buyers to offer jobs where merchants are matched or send replies. Here there is a time-gap between the purchase and the assigning of the provider of the product or service. Not all PSPs offer this solution though there are players like Mangopay who do.

A few other features which are important to review are the following when selecting your PSP for your marketplace:

Payouts in multiple currencies

If your marketplace is operating in many countries with differing currencies, then you may want to investigate PSP’s that offer FX solutions. PSP’s like Payoneer are specialized in handling many merchant payouts in many different currencies. Something a marketplace can save considerable money on as regular FX services can come with hefty fees, leaving your margins very slim or even not profitable.

Dispute and fraud control

If your marketplace requires a delay in payouts or an escrow-like service, you automatically enter the world of chargebacks. This is a scenario in which the buyer puts in a request to refund their money via their credit card company. In many instances the credit card companies side with the customer, and you find yourself on the losing end because the product or service has already been delivered.

There are PSP’s who offer solutions for this in the form of insurances, like Paypal as a seller protection offering, or Stripe which offers stripe radar, an automated tool which helps predict fraud and can therefore save you a lot of money.


The ease of integrating marketplace PSP’s differs and often depends on a few factors. Namely, their API documentation and technical support, and possibly the specific features need to be activated. This factor may not be a long-term consideration that affects your decision making, but it can be important in the short term.


Selecting your marketplace PSP depends on your unique business case, and the features you require both at present and in future. We have consultants ready who can help you select and lead the conversations with the PSP’s to come to the right choice. Contact us!

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