Many entrepreneurs pay a lot of attention to marketing technology and product issues when launching a marketplace while organizing convenient and efficient payment flows is perhaps one of the most difficult tasks. Without the proper organization of financial transactions, your online platform is unlikely to be efficient.
What should you pay attention to?
An important aspect that needs to be paid attention to is the conversion or, in other words, the possibility of making a deal “right here and now”. For example, on the Etsy handicrafts platform, this means the percentage of goods sold, on Airbnb – the percentage of rooms booked, on Uber – the percentage of drivers with passengers. You need to closely monitor the conversion rate and try to increase it. In other words, high conversion, i.e., perfect transactions should indicate the presence of happy users.
Where will the payment be made?
The first thing to decide when launching the marketplace is whether the payment will be made on your website or on the supplier’s website. Many marketplaces, for example, the Etsy, skip this step, that means, that they are, in fact, only aggregators of offers and prices. Here the client just creates a request for an order and makes the payment for a product or service already outside the platform. If you decide that making the payment via your platform is necessary, you need to choose a step in the checkout process on which the payment will take place.
How to choose the right payment method?
Due to the wide geography of credit cards, they are the most common method of payment in the world. They are particularly well suited for online payments, as payment providers offer a wide range of fraud protection services.
In addition to credit cards, there are other payment methods used for online payments. Many buyers prefer to pay for orders with electronic money, rather than sharing their credit card information with a site that they haven’t heard about before. Also, when setting up payment methods, you should not forget about bank transfer – e-invoicing, Apple Pay and other payment methods.
It is also worth thinking about connecting a payment using PayPal. It is an international payment system that helps to transfer money to individuals or legal entities, even across country borders.
How to deal with the processing of online payments?
Online payment processing is a legally regulated area. Building your billing process can involve a lot of bureaucracy. If you want that sellers on your site can accept credit card payments, you have to become PCI DSS compliant and work with payments via your billing page or use a payment gateway that will provide you secure billing page.
How to receive money from the client?
On traditional e-commerce sites, money is transferred to the store within 1-2 days. This process works ideally when a customer buys a physical product that is available in stock.
However, the money receiving can be stretched in time, if it is a rental or purchase of services. For example, in Airbnb-like services, apartment owners can conduct additional guest checks or forget to update the calendar with reservation. Guest may also want to agree on the final price before payment. To solve all these issues, hotel booking services have several payment options. For example, this is an instant booking that works in the same way as a traditional e-commerce site: payment takes place without separate approval from the service.
If the service does not include an instant booking, then a room reservation may occur by prior authorization: the guest enters his credit card details and approves the payment, but the money is not transferred. Instead, the bank ensures that the card has enough money. Then the message is sent to the service, which can either approve or reject the order. If the payment is approved, a credit card withdrawal occurs. If not, the transfer is not performed. It should be noted that pre-authorization is possible only using credit cards and PayPal, but other payment methods, such as bank transfers, may not allow it. This is important to keep in mind when choosing a payment method.
A little more complicated is the process of forming the cost and payment for services on the IT freelance market, that uses an hourly payment model. The client only knows the hourly price in advance, and the final price is calculated only after the completion of the project.
Money transfer to the seller
In a typical online-store, cash flow is completed when you receive funds. In the case of the marketplace, the money must be transferred to the seller. You need to make two basic decisions: when you need to transfer money to the seller and how to do it in the best way.
The easiest option is to transfer money to the seller immediately after making the payment. However, there are situations where this may not be the best solution. As we discussed earlier, your service can act as a trusted mediator who ensures that the customer receives the ordered product or service. One way to do this is to defer payment to the seller until the customer confirms goods or service receiving.
There are many ways to interact between seller and customers. One of them is to become a service provider yourself and independently carry out transactions with customers. Such an example is Uber taxi service. Drivers do not have direct financial relations with passengers. Uber guarantees the level of service and collects money from customers on their own. Drivers in this case act as contractors.
After you have received confirmation of the service, you need to make a payment to the seller. But not everything is so simple. Before making a payment, the company must identify and establish the identity of the counterparty – the KYC (Know Your Customer) procedure. This requirement applies to obtain complete information about counterparties – legal entities, the nature of their business and individual business transactions, for which financial operations are carried out.
Criteria for choosing a payment system for the site
You should not immediately choose the most popular payment aggregator – the much-acclaimed product is not always appropriate for you. Note the following specifications:
- How many years has the payment system been on the market? To avoid risks, you should pay attention to those companies that have a history and a stable positive reputation.
- How easy is the registration procedure? A few mouse clicks or a trip to the office for a contract is a different amount of time and effort.
- What features does the payment system have? What distinguishes it from others (besides tariffs)? The ability to invoice manually (relevant for social networks), payment information via SMS, additional delivery service, providing a CMS for the site, working with rare cashless payment systems, customizing (setting up) the payment page – these are just some of the chips that individual can boast representatives of intermediary companies.
- How much aggregator tariffs meet your capabilities? In this issue, you need to understand thoroughly. Most likely, in addition to studying information about the conditions of cooperation laid out in public access, you will have to communicate with the representative of the organization. The rate may depend on many factors, but usually on the turnover of your online store.
- Is it possible to integrate with your site? Most often, payment aggregator modules are multiplatform, that is suitable for most popular systems and technologies.
- What is the statistics of the most popular payment systems for the site? Information about the popularity of the company does not play a key role in choosing of system, but it can be a certain indicator of its reputation.
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We considered the types of payment options in the work of the marketplace. The main task when launching the platform is to make payments as convenient as possible for all users. To do this, you need to select partners carefully, carry out the integration and work on conversion.