Marketplace Merchant Account: The Ultimate Guide.
What is Marketplace Payment Processing?
A marketplace payment processing solution refers to a financial technology that allows marketplaces to collect payments from buyers and distribute them to sellers. For all types of marketplaces that operate over the internet through a mobile app or e-commerce website, it is important to have a reliable and cost-effective marketplace payment processing solution.
The team at QuadraPay has been assisting marketplaces since the year 2016 with reliable marketplace payment processing solutions. We have created this guide for your benefit. In this guide, you will come to know about how a marketplace payment processing solution works and how to choose the right credit card processor for your marketplace business. Let’s begin.
How Marketplace Payment Processing Works
Marketplaces differ from traditional e-commerce websites. In a regular e-commerce website, there is only one seller and multiple buyers; however, on a marketplace website, there can be multiple sellers selling to a much larger number of buyers. Each seller may have common and different products. The pricing of the product may also match or vary. Basically on a marketplace, buyers compete with each other to make sales. An excellent example of a marketplace is Amazon.com. Let us quickly understand how payment processing works in marketplaces.
A buyer visits the marketplace, makes the selection, and reaches the checkout page. The buyer selects the preferred payment method and completes the transaction.
The funds from the credit card are collected by the payment gateway, and a notification is sent to the buyer and the seller. Now the seller starts the fulfillment process.
The funds are not immediately sent to the seller. This is done to reduce the credit risk. At this point, it is important for you to understand that when multiple sellers sell on a marketplace, then it becomes extremely difficult for the marketplace owner to ensure product delivery and customer satisfaction. This is why many payment service providers hold the payments of the marketplace merchant for some time. The funds are generally released when the proof of delivery is submitted.
The payments are urgently held in escrow or sometimes released in splits as well. Many payment service providers prefer to process transactions in batches. Overall, it depends on the business model and the risk appetite of the credit card processor.
After the successful delivery of the product to the customer, the seller payout is released . Most of the time, acquiring banks issue the settlement to the marketplace merchant via bank transfer, ACH, OCT, or other marketplace split payout solutions.
Choosing the Best Marketplace Payment Processing Solution
When selecting a marketplace payment processing account, it is important to ensure that the most important functions are available in the solution. These are critical, as without these functions, it can become extremely difficult for the marketplace to grow.
The credit card processing company must support multiple payment methods. If you are going to launch a marketplace and think that only using credit card processing as a payment method will be enough, then we are sorry; you are wrong. The payment processor should have multiple payment methods, such as credit cards, ACH, wallets, and gift cards.
The next important functionality that you must look at is the global reach and currency support. Your marketplace will operate in the international market, so the payment processor must allow you to accept global currencies such as US dollars, euros, British pounds, Canadian dollars, and Australian dollars, to name a few. The processor should be comfortable in accepting transactional traffic from regions like the United Kingdom, European Union, North America, Australia, and New Zealand. From these regions, the maximum traffic for international marketplace sales is generated.
On your Marketplace, you will be handling a lot of transactions, and that requires you to follow important rules and regulations. For this, you should ensure that your payment processor complies with various guidelines such as PCI DSS, KYC, and aml. Along with your payment processor, you will also have to ensure that these compliances are fulfilled.
The next thing you need to look into in a good merchant processor for your marketplace is the ability of integration. You may be creating the marketplace on a content management system like Dokan or building it on custom code. Whatever the case, the provider should offer you the ability to integrate. It’s helpful to ask the provider if they can offer integration to your website platform before initiating the application process.
Marketplace Payment Gateways: Key Features to Look For
The Marketplace payment gateway is responsible for processing credit card transactions between buyers and sellers securely. There are some important features that you cannot ignore when you are using a marketplace payment gateway.
Multi-Vendor Support: The gateway must support payment collection and payouts for multiple sellers. Work with a provider that offers full multi-vendor payment and payout support.
Automated Payouts Payment gateways should have automatic payout features for the sellers. This is important because making manual payouts can be extremely tough for marketplace merchants as the number of sellers keeps on increasing.
Fraud Protection. Marketplaces are targeted by frauds all the time. For this, it is important that your website and the payment processor utilize all possible fraud identification and reduction tools. These days, well-known marketplace payment processing companies use AI-based fraud detection tools that are quite effective.
Rates and Fees for Marketplace Payment Processing Accounts
An expensive but secure marketplace payment processing solution is 1000 times better than an inexpensive but insecure solution.
QuadraPay believes that marketplace merchants, big and small, should get access to affordable credit card processing solutions. We provide such options in association with the finest credit card processing companies in Europe and North America. For Marketplace merchants, it is important to be clear about the types of fees that may be associated with the merchant account. Here we have given a breakdown of these fees along with a tentative structure.
Merchant Discount Rate (MDR). This is a fixed percentage-based fee that will apply to all the transactions over the marketplace website. Our payment processing partners offer interchange plus pricing and fixed pricing models for marketplaces. Merchants can directly negotiate the pricing with our acquiring partners.
A per-transaction fee is a fixed fee that is applicable on each transaction, whether it’s successful or declined. You can consider this as a service fee of the gateway.
Chargeback Fees. This fee only applies when the marketplace merchant gets a dispute and loses the chargeback case.
Return Fees. This fee is paid when a merchant initiates the refund to the buyer. Many times merchants initiate refunds just to avoid chargebacks.
Marketplace Merchant Processing FAQ
How Does Seller Onboarding Work in an Online Marketplace?
Marketplaces must verify the sellers corporate and personal identity before onboarding. This included collecting tax IDs, bank details, and supplier agreements. Most marketplaces use KYC verification services to ensure that the accounts are given to genuine merchants. The merchant should run regular checks to ensure that the marketplace stays safe and secure.
The approval process starts with the review. If the marketplace works as a merchant of record, then the payment processor performs additional screening. Buyers submit bank account validation documents. This is required to ensure that the split payment settlement goes to the valid account. By following a proper onboarding process, marketplaces ensure a safe transaction processing environment.
Conclusion: Find the Right Marketplace Payment Processing Solution for Your Business
In summary, we can say that when you are searching for a marketplace payment processing solution, look for a provider that has experience in serving the industry. It can be very difficult for inexperienced payment processing companies to handle the massive transaction numbers of any large marketplace like yours. The payment processor should also be cost-effective as marketplace owners work on a very small margin of profit.
If you have any further questions related to marketplace payment processing, do not hesitate to contact us; you can send an email to [email protected], or you can also fill out the short form on a website.
