Payments are a critical part of any marketplace, especially since most platforms take a cut of the transactions between buyers and sellers. This section focuses primarily on executing payments that go with the transaction -- depending on your business model, you may also have payments in other areas of the app, like subscriptions or posting fees. There are many things to consider when it comes to payments on your platform which are outlined below.
The price for a transaction may be determined at different points in the process, so we talk about the mechanism here as part of payments as that is when it will come into play. There are several ways pricing can be determined.
Payment timing is typically about peace of mind for both buyer and seller. Transactions between strangers require trust that the other will fulfill their end of the deal, so buyers are reluctant to pay before confirming the value and sellers are equally reluctant to fulfill without their cash. In the buyer’s case, they can either pay the seller directly through the platform, or can pay the app or into an escrow service. There are a few ways to navigate this.
The format of payment can often play a role in creating a smooth experience for each side. Platforms can choose to accept multiple options, but it can be costly and create inconsistent flows. Below are the most common options.
Similar to the buyer side, sellers need their payments to come through at a time that builds trust. Buyers will always provide the money first, but a seller may receive that money at different times. This will also play a part in when you as the platform receive your payment, as it is likely you will be taking a portion of the transaction fee. This is commonly done by splitting the payment and sending or allocation one portion to the seller and some percentage to the platform. Below are the different timings for when this can occur.
In cases where the platform has a delay between buyer payment and seller payout, there are several mechanisms the app can use to bridge the gap and preserve trust.
Payments and processing transactions is a complex process behind the scenes. Entire companies have been built just to handle this part of the process for other platforms and merchants. Even companies as large as Amazon use tools like Stripe to handle their payments. All payment providers have some sort of API documentation to integrate with sites and differing levels of pricing.