It is important for you to understand that two-sided marketplaces are not standard businesses. This is because they handle money between multiple parties. If you run a two-sided marketplace, then you are collecting funds from customers, and then you are holding or routing those funds. Along with that, you are also making sure that you are paying out to the vendors. This type of business model requires a custom merchant account structure and not a plug-and-play gateway. Without the right setup, you are basically going to risk fund holds, compliance issues, or even sudden shutdown of the merchant account.
Before accepting an offer of any payment gateway, you must look at the core capabilities. These are mandatory for two-sided marketplaces.
To operate smoothly, your payment infrastructure should provide you the ability to accept split settlement. This means the solution will automatically divide funds between the platform and the sellers. You should also have the ability to onboard sub-merchants, which includes KYC/KYB for every vendor on your platform. The solution should also offer escrow or delayed payout. This is important to manage disputes and to adhere to delivery timelines. To grow your business globally, you must have the multi-currency processing support. Because I’m pretty sure you’re going to launch or you’re operating a global marketplace. All of these factors are not optional. They are basically foundational for scale and compliance.
You should also know that in your industry, compliance is the real gatekeeper.
Marketplaces always fall under stricter scrutiny, and this is because they are effectively acting as a payment facilitator or aggregator. Let me explain to you in simple terms. AML and fraud monitoring must be done across all users. Along with that, you should have documentation for a clear flow of funds. Your payment processor should have the proper underwriting done for both the platform and its sellers. If this is not the structure that is what you are using currently or from day one, then it can be challenging for you. With the right structure, you will be able to get the right merchant account on favorable terms.
You must also know that high-risk marketplaces need specialized structuring.
If your marketplace operates in niches such as CBD, trading, digital goods, or adult, Then the challenges multiply for you. Traditional setups are most likely to fail. This is because such industries that your marketplace supports experience a higher chargeback ratio than regular industries. Along with that, such industries are also regulatory sensitive. The reputation risk for your acquiring partner is also a challenge. This is why a multi-layered merchant account setup, along with alternative acquiring routes, can certainly become critical for the survival of your marketplace.
The right approach that you must take to scale, or the winning strategy, would be to build a marketplace like a financial ecosystem and not just like a website. A website can be created by any web developer, but a real entrepreneur creates a system that runs as per the compliance and is truly scalable and has the potential to grow. This simply means that you will have to combine the right acquiring relationship with proper payout logic and full compliance adherence from the start.
Quadrapay is a reseller that works with multiple payment solution providers, and some of them support merchants in the marketplace industry. If you are currently struggling to get approved, or you are not satisfied with your current provider, then you can contact us, and we will get you connected with our processing partners so that you can stay active in your business, scale globally, and dominate your niche.