In the previous blogpost, we discussed the importance of connecting customers and suppliers in the marketplace. Now, let’s proceed to the next important step- Transaction Facilitation.
Many marketplace entrepreneurs focus on user sign-ups in the early stages, but this can be misleading. The number of users alone does not guarantee that the marketplace actually meets the needs of users. The ultimate purpose of a marketplace is to facilitate transactions between users, and that is where the real value lies. In this blog post, we explore the importance of a well-designed transaction flow and how it contributes to market success.
Making the payment
1.Choice of online payment:
In most cases, integrating online payment functionality into your marketplace is critical to your business model. However, it is important to consider that online payments can introduce friction into the transaction process. Some marketplaces, such as Thumbtack and OfferUp, choose to exclude online payments in order to increase transaction frequency. They focus on facilitating agreements between customers and providers and keeping the actual money exchanges outside the platform.
2.Choose your ideal payment method:
If you need to pay online, it’s important to choose the right payment method. Credit cards are used all over the world and are a popular choice due to their added security features against fraud. Direct bank transfers are preferred over credit cards in some regions. It’s important to consider your target audience’s preferences and ensure that the payment method you choose meets their needs.
3.Survey of payment processors:
Well-known global payment methods such as PayPal also provide an alternative for users without credit cards. PayPal can charge higher fees, but offers additional protection programs for customers and vendors. Please note that processing online payments requires compliance with regulations and bureaucratic processes. To facilitate this, consider using a payment gateway that handles compliance. B. Stripe, Braintree, MangoPay, Adyen, or PayPal. We evaluate each provider based on factors such as supported currencies and countries, pricing, available features, and ease of integration.
Moving the money to the provider
For online shops, the transaction is usually complete when the customer’s payment is credited. However, marketplaces work at a more complex level. Funds must not only come in from customers, but also seamlessly flow to relevant providers. While we have seen impressive progress in this area, facilitating these payments can still be surprisingly complex at this time. The marketplace owner or operator has two important decisions to make next.
Determine the best time to transfer funds to your provider and choose the most appropriate method to accomplish this task. Let’s take a closer look at these considerations for optimizing vendor payouts on your marketplace.
1.When to move the money to the provider?
Timing is crucial when it comes to transferring funds to providers in your marketplace. Immediate payouts may seem straightforward, but delaying them can offer benefits. Acting as a service provider yourself, like Uber, ensures control but brings added responsibilities and regulatory concerns.
Escrow services provide a trusted middleman approach, but navigating regulations can be complex. Stay updated on payment gateway solutions, like escrow-like features, to facilitate delayed payouts without licensing hassles.
2.How to move the money to the provider?
Moving funds requires complying with strict regulations to prevent money laundering. Providers must undergo a KYC process, with requirements varying based on their country and transaction amount. Simplify compliance by launching in a single country initially.
For commission fees, consider splitting payments upfront or deducting fees after transferring the full amount to providers. Each approach has its own advantages and compliance considerations. Ensure smooth provider payments by making informed decisions about timing, methods, and commission collection.
Marketplace business owner should focused primarily on simplifying the transaction process for users of the platform. Each step of a transaction requires careful consideration and decision. The aim is to create a clear and user-friendly checkout process. One of the first decisions is whether to integrate online payments (usually methods such as credit cards, bank transfers, wire transfers, PayPal, etc.). It is important to ensure the security of transactions before funds are transferred from customers. However, transferring funds to providers can be complicated by regulatory requirements. Holding funds on behalf of others may require obtaining a trust license.
Alternatively, a vendor can establish a relationship as a contractor or employee, or charge a credit card only after a service has been rendered. Vendors must undergo a verification process before transferring funds, which can be difficult for marketplaces that allow low-value items to be exchanged between individuals. Now that we’ve covered the basics of marketplace platform design, the next chapter will dive deeper into strategies for platform adoption, user acquisition, and business growth.
Are you ready to put the insights of our blog post into action and transform your market? We- Michael and Patrick who have more than 10 years experiences can make it happen! As a leading provider of marketplace solutions, we understand the challenges you face and provide customized solutions to meet your unique needs. From streamlining the checkout process to simplifying transactions to ensuring regulatory compliance, our platform is designed to enhance every aspect of the market.
Take action now to unlock your true business potential. Let’s make your vision a reality together. Get started today and revolutionize your marketplace with Mindset!