What are the key features of marketplace payment solutions?

There are a number of specific payment features marketplaces need from a payment service provider. This article compares the key features from four prominent PSPs: PayPal, Stripe, Adyen, and MANGOPAY.

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Marketplaces payment costs & more

This is the second of three articles that cover the most important things you should know when choosing a payment service provider for your marketplace. The first article is an introduce to this complete marketplace payments guide. The third part discusses payment provider costs and other relevant factors.

What is the best payment service provider (PSP) for an online marketplace? This article series will help you answer the question for your specific situation. In the first article, we discussed marketplace payment providers, and the third looks at practical differences such as costs and ease of integration. This article will help you understand the key payment features marketplaces should look at when comparing payment processors.

After reading the first article in this series, you now have a list of payment service providers (PSPs) that you could consider for your marketplace. The next step is to compare the companies—Stripe, PayPal, Adyen, and MANGOPAY—based on payment features that are most relevant for marketplaces. This article helps you determine those features.

To understand the specific payment requirements of online marketplaces, it's helpful to use Airbnb as an example. On Airbnb, a large number of individual consumers need to be able to not only send but also receive money. What is more, the host shouldn't get the money the moment the guest makes the payment. Instead, Airbnb acts as a trusted middleman and only distributes the money to the host once the guest has entered the accommodation successfully. Airbnb also doesn't distribute the entire payment amount to the host, but first deducts a commission, which forms its revenue stream.

To enable all this, the payment service provider needs to support the following features: automated Know your customer (KYC) process for individuals, splitting payments between multiple parties, and delaying payout on behalf of the providers. In addition, marketplaces with high volumes typically need to deal with issues related to credit card disputes and tax reporting. PSPs often offer tools that help marketplace founders handle these issues.

We will go through all of these necessary features below. In addition, we will discuss a feature that is not required by most marketplaces but is vital for some: subscription billing.

Know your customer process

In the context of online payments, Know Your Customer (KYC) typically refers to laws related to paying out funds to individuals and companies. Every country has its own regulation, but the process usually entails collecting specific information about each individual or company receiving funds and verifying this information. The collected information typically includes at least a legal name, birth date, and address, but it can also include things like ID verification and submitting other legal documents.

From the point of view of user experience, this presents a challenge for platforms (like Airbnb) that have a large number of providers to which they need to move money. Many of these people are individuals who might only be making a few hundred dollars per year. A marketplace business cannot afford to handle the KYC process for every such individual manually. At the same time, these individuals will likely have little patience with the process: if it's too difficult or time-consuming, they will give up. In other words, it's crucial that your payment service provider offers tools that automate the KYC process and make it as easy as possible for individuals.

All the solutions listed in this article offer KYC support. However, their approaches differ. Stripe, MANGOPAY, and Adyen offer a "white label" process. This means that the user inputs their data through a user interface provided by the marketplace, and a user account to the PSP is created for them under the hood. For example, an individual might not even be aware that a Stripe account has been created for them. Instead, they have simply provided their bank account number and other personal information and then started to receive money directly to their bank account.

Meanwhile, PayPal expects all users who receive money to create a PayPal account. They do provide a tool for simplifying this process, but each user will still know they interact with PayPal.

Both approaches have pros and cons. The white-label experience is the smoothest and quickest for the user. Many people want to avoid creating additional user accounts and passwords to new online services, which a white label process avoids. However, many people already have PayPal accounts, so offering the ability to receive money through PayPal might work to your advantage.

Sometimes the barrier to entry for onboarding providers is that they are concerned about information security—they need to send sensitive information for the KYC process, after all. Because of this, it's important that the marketplace convinces them that their data is safe. The choice of a payment service provider can play a part in various ways.

Stripe, Adyen, and MANGOPAY are all relatively unknown for the majority of people, so mentioning any of them might not do much in terms of creating a sense of safety. Adding a label that says “Payments processed securely by Stripe”, then, might not add value for most people.

Meanwhile, PayPal can induce two types of reactions. On one hand, many people trust PayPal, and knowing the payment will be processed by PayPal may put their minds at ease. On the other hand, some people really dislike PayPal, for instance, due to its past problematic habit of freezing people's accounts.

If all your providers are businesses that process thousands or even tens of thousands of dollars through your platform each year, a smooth KYC process might be less of a problem. If there's a lot for the provider to gain on your platform, they will be happy to jump through all kinds of hoops. In such a situation, other features of the payment service provider are likely more important.

Splitting payments

If your marketplace business model is like Airbnb's, that means a payment by a customer is split into two parts: most of it goes to the provider, but you will charge your commission. A small cut will also go to the payment service provider, but don't worry—for some reason, every PSP has the required functionality in place to take its own cut! You might, however, be surprised to hear that many PSPs don't offer the ability to split a payment between multiple parties.

You might be tempted to circumvent this problem by transferring all revenue to your own bank account and manually paying your providers every month. However, this approach not only doesn't scale well—but it is also often illegal. Holding money on behalf of providers that you do not directly employ requires a license in most jurisdictions, and this license is often difficult to procure.

All the payment service providers discussed in this article offer the ability to split payments between two parties. In some cases, you might want to split the payment between more than two parties. A typical example is a multi-vendor shopping cart, where a customer purchases items from multiple providers during a single checkout. Another situation is where you have a referral program and want to send a part of the payment to a person who brought in the provider through a referral.

Stripe added the ability to split payments to an unlimited number of parties only relatively recently. MANGOPAY has had the functionality for a longer time. Adyen also offers the ability to split payments to multiple parties.

Delayed payout and escrow

As mentioned before, marketplaces like Airbnb don't immediately transfer the money paid by a customer to the host. Instead, they delay the payment until the guest has entered the accommodation successfully.

To delay the payout to the provider, a platform needs to be able to hold the money for a while after the customer has made the payment. This process is generally referred to as escrow: "a contractual arrangement in which a third party receives and disburses money or documents for the primary transacting parties".

As mentioned above, holding money on behalf of people who are not your employees is heavily regulated, and a license for offering escrow is required in most countries. This license can be quite hard to get. Luckily, platforms can ignore this requirement by utilizing a payment service provider that offers escrow or an escrow-like functionality.

Out of the four companies discussed here, MANGOPAY is the strongest contender in this area. Thanks to their E-Money Issuer (EMI) Licence, they can offer an escrow solution in all countries they operate in, and there's no strict limit to how long they can hold the money.

Stripe doesn't have a similar license, which means they can't officially call their product escrow. In practice, they can provide identical functionality, albeit with some time limits: they can offer all of their Connect product users a payout delay of a maximum of three months, and in some special cases, it can be extended to a maximum of six months. If you need to hold funds for a period longer than six months, Stripe's solution is not ideal for you.

PayPal confirmed they're able to hold funds for up to 30 days, and their representative did tell us that longer periods might be possible. They partly compensate for the lack of a longer escrow by offering buyer protection: if something goes wrong in the transaction, the buyer can file a claim and get their money back. However, the protection doesn't apply to all transactions, so the security is not quite at the same level as compared to the protection offered by delayed payout.

Adyen doesn't offer information on their ability to delay payouts on their website, and their representatives have not been able to comment on whether they offer this capability.

Dispute handling and fraud prevention

If you wish to delay payouts, there's an important additional factor you should consider: delayed payouts make you liable for credit card disputes, also called chargebacks. In credit card disputes, the owner of the credit card files a complaint to the credit card company after they've purchased a product or a service. Especially in the United States, credit card companies usually take the side of the customer, return the money, and charge it from the provider. This has resulted in a problem that plagues many online marketplaces: dishonest customers file disputes even though they have received the product or service they purchased.

If you don't delay payouts, the provider is typically responsible for the costs associated with a chargeback. If you delay payouts, you might be liable for the chargeback, which can mean significant costs for you. You can, of course, dictate in your terms of use that the providers are responsible for chargebacks, but you will then need to handle money collection from them, and if they refuse to pay, the ultimate legal responsibility lies with you.

The fact that fraud is possible is also an opportunity for online marketplaces to provide value in the transaction process: if you cover the dispute costs for your providers, this type of "insurance" might justify charging a higher commission from them. However, to do this you need to make sure the volume of disputes is low enough to justify the policy.

Furthermore, the 2019 change in European payment regulation introduced a considerable improvement to chargebacks. If your payment service provider uses the 3D Secure 2 protocol to verify payments, liability for disputes is shifted to the credit card issuer.

Using 3D Secure 2 shifts this liability away from the marketplace. Card issuers are now responsible for covering any payment verified through the 3DS 2 protocol and disputed as fraudulent. All four payment service providers discussed in this article offer 3D Secure 2 verification.

Tax reporting

If the monthly volume of your individual providers is high enough, they typically need to report their income to tax officials. If the income consists of a large number of small transactions, this can be a complicated process. Naturally, variations exist in local legislation. For example, the EU's DAC7 regulation comes into effect in 2023 and extends tax transparency rules to online marketplaces.

This is a complex area to handle well, and no payment service provider offers comprehensive tools for all countries. However, if you're based in the United States and deal with providers that process over $20k in annual transaction volume over 200+ transactions, Stripe offers powerful tax reporting tools. You can use these tools to automate the creation of 1099-K forms, which can provide a lot of value for your providers.

While such tools can be helpful, in general, it's not the first priority of online marketplaces to offer them since they only start to offer value when the volumes of individual providers become substantial.

Subscription payments

Subscription payments (also called recurring payments) refer to situations where a marketplace stores customers’ credit card details to allow their providers to bill their customers at regular intervals without requiring any action from the customer.

A few examples of marketplaces where subscription billing might be critical:

  • A peer-to-peer storage platform, where the billing happens monthly until the customer removes their stuff from storage.
  • A platform for booking home cleaning, where a customer can purchase a package of, for instance, two cleanings per month.
  • An Airbnb-like platform for longer-term rentals, where the monthly rent is paid automatically through the platform.

Enabling subscription billing can be pretty complicated. You need to figure out what happens when a recurring payment fails due to an expired credit card, how to deal with disputes, how a subscription is canceled, how refunds are dealt with, and so on.

Stripe offers lots of helpful functionality related to subscription billing that also works with its Connect product. Even though MANGOPAY also supports subscription billing, Stripe is probably the best choice if subscription billing is a must-have feature. Adyen and PayPal don't have official documentation on subscription billing and their representatives didn't respond to our questions about it.

Is your target market supported?

As explained earlier, each country has its own regulation related to online payments. Because of this, no payment service provider supports all the features listed above in all countries. When choosing a payment service provider, it's important to understand the feature set each PSP offers in the countries you're targeting.

There are three main factors to consider. First, you need to be sure that the PSP can offer payouts to bank accounts in the countries you want to support. Second, you should make sure the PSP can handle payments in the currencies of the countries in question. Third, it’s essential that the PSP can support the most important payment methods in those countries. You need all of these capabilities to offer a sufficiently good payment experience.

PayPal boasts a large number of supported countries but is lacking in the currencies they support: as of this writing, there are 26 of them, two of which (Indian rupee and Brazilian real) are only supported for local payments (both the customer and the provider need to be based in India/Brazil).

In terms of payment methods, PayPal has the advantage of offering its own payment method. A number of people prefer to pay with PayPal instead of a credit card. However, some of Sharetribe's customers have reported that in certain countries, PayPal doesn’t support credit card payments at all. We reached out to the PayPal team to ask about this, and they stated that credit card payments should work in all the countries they support. This hasn't been our experience so far, and since not all users might be willing to create a PayPal account, this might be a problem for your marketplace. If you plan to use PayPal for Marketplaces, we would advise you to ensure that credit card payments will not be a problem in your country.

Stripe, meanwhile, does things the other way round. As of this writing, it supports more than 100 currencies, but only 43 countries. For now, Stripe's Connect product is only available in 22 of them: India, Brazil, Mexico and Singapore are not yet supported by Connect. In terms of payment methods, Stripe's drawback is that it doesn't support PayPal payments. However, what it can guarantee is that credit card payments work in all the countries it supports.

In addition to credit card payments, Stripe supports a variety of local payment methods not supported by PayPal. For example, in the Netherlands, most people prefer iDEAL payments instead of credit cards. Similarly, in Germany, many people prefer SOFORT and Giropay, both supported by Stripe. Stripe's team has written an excellent article on choosing which payment methods you should support.

Adyen has the widest range of supported payment methods. Besides PayPal, Adyen is the only other payment service provider in our comparison that supports PayPal payments. Adyen is also the only PSP that supports Finnish online banking payments, which is an important factor in a country like Finland, where payments via online banks are relatively popular. We reached out to Adyen to ask whether all the listed payment methods are also supported by their Adyen for Platforms (earlier MarketPay) product, but didn't receive an answer.

MANGOPAY’s list of payment methods is almost identical to Stripe's. It is authorized to process payments in 100+ countries but only support 11 currencies. MANGOPAY also offers payouts to US and Canada, but the company operating the marketplace cannot be based in these countries. Also, MANGOPAY’s support told us that because of their license, they can only support US merchants with relatively low payment volumes. If onboarding a large number of high-volume providers in the US or Canada is important to you, or if you're not based in Europe yourself, MANGOPAY is not for you.


In this article, we looked at the specific payment requirements marketplaces have, and how each of the four companies—Stripe Connect, PayPal, Adyen, and MANGOPAY—adhere to them.

A Know your customer (KYC) process usually entails collecting information about each individual or company that receives funds from your platform as well as verifying this information. It is crucial that your payment partner makes the process as easy as possible. Each of the four PSPs offers KYC support, but their approaches differ. Stripe, MANGOPAY, and Adyen offer a "white label" process, which means the user inputs their data on the marketplace's user interface and the PSP creates an account for them under the hood. Paypal, meanwhile, requires users to create an account on the service.

For you to deduct your commission from each payment to your providers, your PSP needs to support splitting payments. All of the companies discussed in this article offer this feature, but in case you need to split your payment between more than two parties, your options are limited to Stripe, MANGOPAY, and Adyen.

Each of the PSPs allows you to delay payouts to providers, but the length of payout delays varies. The strongest company in this area is MANGOPAY: they offer an escrow solution in all countries they operate in without a strict time limit.

Delaying payouts can make you liable for credit card disputes. If you delay payouts, you are usually liable for possible disputes. Out of the four PSPs, PayPal is the only one that offers protection against disputes, while Stripe provides tools to reduce the risks of disputes.

Tax reporting is a complex area with lots of variation in local legislation and is usually not a priority feature for online marketplaces. In the US, Stripe offers tax reporting tools for marketplaces with high-volume providers.

Subscription payments are possible with Stripe and MANGOPAY, and Stripe in particular offers a lot of helpful functionalities in this domain.

No PSP supports all the features discussed in the article in all countries. Therefore it is important to ensure that your PSP offers payouts to bank accounts in the country you are targeting, handles payments in its currency, and supports the most important payment method people in the country use. The countries, currencies, and payment methods each PSP offers vary greatly.

In the next article, we will look at marketplace payment service costs and other important factors you should also consider before making the choice for your marketplace.

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