How to choose a marketplace payment solution

Choosing online payment solutions for your marketplace

What if I said that your payment solution stopped working? Terrifying, right? ‘Cause we all know that the payment solution is an inherent part of any online marketplace. Without it, your marketplace will struggle to survive.

Payment method affects your business model, payback, trust and popularity among users. The right payment method helps to increase sales, reduces the fraud risk, improves chargeback management, and even expands your business internationally.

As you can see, this is not a thing to go over lightly. There are a lot of factors to be considered. Let’s take a closer look.

Available online marketplace payment solutions

Basically, there are three main online monetization models: wire transfer, payment gateways, and personal payment solutions.

#1 Wire transfer

This method allows you to accept money via direct bank transfer. Some startup marketplaces use direct bank transfers, but such online payment gateway has its disadvantages:

  • Fees for users: There are large fees for bank transfers: American banks may charge 15-35% per transfer (TD Bank, US Bank, Citibank, etc.). European banks are cheaper, for instance, ING Bank (Holland) charges €6 per transfer.
  • Security: Lack features such as fraud protection or the ability to pre-authorize payments, it is impossible to get reversals or chargebacks.
  • Time: The bank transfer takes around one week to be processed. It is not convenient, especially when you have an Airbnb-like marketplace: if the online payment option is inappropriate, then the payment delays and the client won’t be able to use the rent.
  • Price. This payment method may be a good idea in case you are looking for a cheap solution. All you need is to send an invoice and get your bank transaction.
  • Implementation. There is no need to spend additional costs on the implementation process, that may be crucial for brand-new startups.

#2 Marketplace payment gateway

This could be any software that helps to facilitate the transaction between the marketplace and its customers. There are a lot of different online payment options, but you need to choose wisely because of such factors:

  • Types of payments. Online payment gateway options allow connecting different types of payments. For instance, Stripe and Adyen allow you to pay with international credit card payment gateway and payment methods (VISA, MasterCard, American Express, Alipay, etc.).
  • Fees for users. The average fee for one transaction is 2,9% + $0,30 (PayPal for marketplaces in the US, Google Checkout, Amazon Payments, Braintree, Stripe marketplace payments).
  • Ease of integration. A lot of payment gateways are targeted on startups, so their documentation is clear (Adyen) and integration is quick (Stripe). But, in some cases, the payment gateways have small API (MANGOPAY) or are difficult to implement (PayPal).
  • Security. The best payment gateways for marketplace offer you various security tools, such as SSL, PCI, 3D Secure, escrow payments. You can use tokenization and anti-fraud tools.
  • Technical support. As usual, is 24/7 (Stripe), some companies offer feedback forms, support via phone in English, German and French (MANGOPAY), or offers you live chat (Dwolla).
  • Geolocation. Before learning about how to implement a payment gateway, check the geography of your provider. This is where you should be careful, as long as some online payment solutions are restricted in different countries: PayPal is partially restricted in some countries, Adyen doesn’t work in Ukraine and Stripe is unavailable in the United Arab Emirates. As a vendor, you can only change a payment provider or choose another country to register your marketplace.

Note: there are two main ways to implement payment gateway to your marketplace: via widget or via API:

  • Widget. You only need to integrate a provide’s widget to your marketplace, and storage and security will be up to your provider. As a disadvantage, such a widget may have an inappropriate or hard-to-adapt design.
  • API. You can integrate payment gateway via API, creating front-end part and page making. But, you have to be responsible for the money of customers, as far as you should store it before sending to the vendor. In addition, you will need to pass PCI DSS certification and spend up to one year of development of secure architecture and data storage.

#3 Creating a custom payment gateway

You can also create your own payment solution, but such a method may be hard to implement:

  • Security and costs. To use your own payment integration, you will need to have a PCI DSS Certificate, which is expensive. Such a certificate will be required in every country when you are working.
  • Time. Such development will cost you about 5 years.
  • Team. You will need to hire a team to develop and integrate such online business payment solutions. As a result, the whole thing will cost you too much time and money.

Now you know how to connect website with payment gateway, so it is your turn to choose the right solution. Specify your requirements and choose the right payment solutions that will fit both you and your customers.

Olga Iakubovska

Olga Iakubovska

Project Manager

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