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Guide to Marketplace Payment Providers

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Last editedJune 20222 min read

Creating an online payment system can be a costly process, with the potential to significantly reduce a company’s operating income. Plus, it’s an area that’s heavily regulated. That’s why most businesses, even many larger ones, avoid building their own payment infrastructure. It makes more sense to set up a partnership with a payment service provider (PSP). Payment service providers - or payment gateways - specialise in providing payment infrastructure for companies in exchange for an ongoing fee.

Nowadays, more and more PSPs are able to provide online marketplaces with a way to support their specific requirements and transaction flows. These are known as marketplace payment providers or marketplace payment gateways.

In this post, we’ll ask, “how does marketplace payment work?” and discuss how marketplace payment providers can help offer more marketplace payment options to users.

How does marketplace payment work?

Marketplaces are platforms which connect buyers and sellers, for example, Amazon, eBay, Airtasker and Uber. They are intermediaries that are responsible for accepting and processing payments for their users. A marketplace payment gateway makes this payment processing easier and safer.

When using a payment gateway, the marketplace generally accepts payment from a buyer before the item is delivered to them from the seller. Marketplace payment providers charge the marketplace a fee for using their services, and marketplaces typically pass a percentage of this fee on to the seller.

When it comes to a freelancing marketplace like Upwork, the marketplace often withholds the seller’s fee until their services commence or have been completed. The buyer’s money is held “in escrow” to ensure sellers carry out their obligations as outlined in the terms and conditions of the marketplace.

Why use a marketplace payment gateway?

Using a marketplace payment gateway helps marketplaces to mitigate risk, especially where marketplace funds are being held “in escrow”. These kinds of payment service providers are equipped to not only enable marketplace transactions, but have robust compliance policies and insurance in place. This means that any money kept in Escrow is kept in a secure and regulated way.

It’s important to recognise, however, that the marketplace itself is still classified as the limited collection agent even when using marketplace payment providers.

Marketplace payment options

Being able to integrate end-to-end, account-to-account payment solutions to disburse funds securely and reliably is crucial to successfully running an online marketplace. It’s essential that marketplace users have a positive experience when making a purchase, so payment processing needs to be efficient and error-free. Most marketplace payment gateways facilitate the ability to offer a variety of online payment methods, including:

Credit cards: Accepting credit cards as a form of debit makes payment convenient for consumers, but entails high fees for the marketplace, fees which are often passed onto consumers. GoCardless, for example, has lower fees for merchants than credit cards, making it a more cost-efficient option. 

ACH payments: These send funds from bank account to bank account at a low cost. Having a payment process in place for collecting and presenting these transactions easily can help with monitoring and coping with support issues. A marketplace payment provider can be used to boost efficiencies for these kinds of transactions

Debit cards: Push to debit payments combine the speed of a card transaction with affordability – and the same control as a bank to bank transfer.

Real-time payments: Real-time payments (RTPs) are account to account payments that settle instantaneously, with no checks or processing delays. Real-time payments are overseen by the New Payments Platform Australia (NPPA). This allows merchants to pull payments on customers’ bank accounts – and has been found useful for recurring transactions, for example utility bills too.

Marketplace payment providers offer a host of benefits including helping to streamline the payment process and keep transactions secure. They boost user satisfaction and allow businesses to deal with any payment issues that may arise.

For businesses that need a reliable way to accept customer payments, GoCardless can be a potential option, giving companies a quick and easy option which comes at an affordable price. 

We can help

GoCardless is a global payments solution that helps you automate payment collection, cutting down on the amount of financial admin your team needs to deal with. Find out how GoCardless can help you with one-off or recurring payments.

Over 85,000 businesses use GoCardless to get paid on time. Learn more about how you can improve payment processing at your business today.

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