Marketplace payments – Costs, integration, and more things to consider
When you are choosing a payment service provider, payment costs, ease of integration, and quality of customer service are important things to consider. In this article, we discuss how PayPal, Stripe, Adyen, and MANGOPAY compare in these aspects.
What is the best payment service provider (PSP) for a marketplace? This article series will help you answer the question for your specific situation. The first article listed the relevant payment service providers, the second the key features. This last article discusses payment costs and other factors you should compare before locking down your choice.
When you are choosing a payment service provider, we suggest you narrow down the selection to the most relevant PSPs for online marketplaces, and then look at a set of key features that you should pay close attention to. If your target market is narrow, or if there are some features you can’t compromise on, the two previous articles in this series might already have given you all the information you need to make a good choice for your PSP.
If, however, you still have more than one good option, there are other factors that can help you choose between payment service providers.
Costs are naturally an important factor to consider when choosing a payment service provider.
All the payment service providers we discuss in this article series—Stripe, PayPal, Adyen, and MANGOPAY—set their fees based on transaction volume. The cost typically involves a small fixed fee per transaction and a smallish percentage of the total amount paid. However, there are lots of variations that make matters more complicated.
PayPal has the most complicated pricing method, where several factors play a part:
- The country of the provider.
- The country of the customer.
- The transaction volume of the provider.
As an example, for US providers, the base fee is 2,9% + $0.30 for sales where both parties are in the US. No volume discount is offered. If the customer is international, fees go up. Meanwhile, for providers in France the starting cost is 3,4% + 0.25€, but if the monthly volume is more than €2.500, the percentage drops to 2%.
Stripe had a relatively simple pricing for a long time, but in 2017, they made changes to Connect pricing which complicated things quite a bit. Now, the pricing is a combination of their standard pricing (which depends on the country of the platform) and Connect pricing (which depends on the country of the connected account).
In general, Stripe's Connect fees are a bit lower in Europe than PayPal's fees, but PayPal wins slightly in the US. If your marketplace is high-volume, be sure to ask Stripe for volume discounts—it may be available even though they don't publish information about discounts on their web page.
MANGOPAY has simpler pricing than Stripe and PayPal because they only target marketplaces and other similar platforms. In general, MANGOPAY’s rates are quite close to Stripe's rates: in some cases, they are a bit lower, and in others a bit higher.
Adyen is famous for offering the lowest pricing on the market for marketplaces with high volumes, and this is probably among the key reasons they have won over many of the biggest marketplace platforms. For marketplaces in their early days, Adyen’s high minimum monthly fees might pose a challenge.
Ease of integration
Building a payment system for an online marketplace can be a complicated task. Especially if you're a small company, the speed of integration could be even more important in a PSP than its exact feature set.
Stripe has, by far, the best reputation in this area. They have won over a big market by positioning themselves as the "developer-friendly" choice, specifically targeting small startups that require quick integration. The contrast to PayPal’s notoriously difficult integration, in particular, is striking.
At Sharetribe, we've built integrations to both Stripe and PayPal and confirm this experience: integrating with Stripe was a breeze since their documentation was simple, clear, and up to date. Meanwhile, PayPal produced one surprise after another in the form of new undocumented error cases and other unexpected situations we needed to deal with.
MANGOPAY’s product is more focused than Stripe’s. Their API is smaller, which means there are fewer things for developers to learn. Like Stripe, MANGOPAY focuses heavily on startups, which means it also needs to focus heavily on integration speed. However, their documentation is not as polished and clear as Stripe's. Based on the experience we have working with MANGOPAY, Stripe still wins, though with a narrow margin.
Adyen is the only payment provider in the comparison we have no experience with ourselves. Their documentation looks clear and simple. However, they generally target customers with higher volumes, so one might assume that they have put less focus on the speed of integration. Large companies have more developer resources and higher transaction volumes, so for them, the feature set and price are likely much more important.
Quality of customer service
Your payment service provider is an important business partner, and you should expect to be talking to them a lot. It's critical that this communication flows well.
In general, this is an area where smaller PSPs excel. A small company won’t be able to compete against larger players in terms of feature set. They need to make up for this by focusing on a narrow enough segment and offering dedicated support. In addition, providing high-quality support is a lot easier for a small company with a relatively modest feature set, since everyone in the support team will know everything about the product.
PayPal has a lousy reputation in terms of the quality of their customer service. The company is so large that no one knows the full picture and understands all the different rules related to their products. This is particularly challenging when you're operating globally and need to understand how PayPal works in different countries. PayPal's organization is heavily split, and different countries operate fairly independently, often creating their own rules and strategies that only they know.
For us, this has sometimes lead to situations where no-one at PayPal is able to answer our questions. Sometimes, we’ve received replies that are clearly taken directly from their knowledge base, and don't really answer the questions we had in mind. At times, we've received information that is downright wrong. Lately, however, the quality of support has improved. It can still take a while to get an answer, but usually we're able to get our issues fixed.
Our experience with Stripe is mixed. At times, the quality of their support is excellent. In particular, when you talk to the same individual often enough and they thoroughly understand your situation (hello Michael!), things work smoothly.
However, since Stripe is a big organization, it also happens that things take a wrong turn and you end up talking to multiple people who give you answers that are vague or contradicting. Unfortunately, our journey with Stripe support has gone in the opposite direction when compared to PayPal: things started off really well, but lately there’s been a lot more challenges and delays.
In the end, the only way to figure out whether a payment service provider is able to offer high-quality support is to test it in practice. Get in touch with them and ask them tough questions (you can ask about the things listed in this article series, for instance).
Things you should consider when evaluating a PSP’s customer support:
- How quickly do they reply?
- Do they seem to understand your question and the context well?
- Is the reply personalized to your particular issue?
- Do they answer the question you asked?
- How easy is it to understand their answer?
- Are they able to answer in the language of your choice? (If you prefer to get support in a language other than English, this is a particularly important matter.)
Can they bring you visibility?
A payment service provider can sometimes bring you benefits that extend beyond functionality. After all, their business model is well aligned with yours: they only make money if your transaction volume is high. It's in their best interest to help you build your business.
One way a PSP can offer such visibility is through partner programs. Each payment service provider has their own partner program and features the partners on their websites. Sometimes this can bring the partners useful leads. In Sharetribe's case, Stripe has connected us directly with a potential customer in a few occasions.
The PSP might also offer to arrange joint marketing. For instance, MANGOPAY organizes events where marketplace experts share their insights. They often invite speakers from companies using their software to speak at such events.
Naturally, the benefit you might get from such efforts largely depends on your marketplace concept. If you're building a peer-to-peer rental platform for children's products, it's not very likely that a payment service provider has channels that would bring you interesting leads. Meanwhile, if you're building a B2B marketplace for freelance developers or IT consultancies, the audience a PSP can bring could be highly relevant for you.
In addition to the key payment features you need from a payment service provider, there are some factors we suggest you consider before you make your final choice.
First, naturally, is the pricing. All the PSPs we compared in this article—Stripe, PayPal, Adyen, and MANGOPAY—base their fees on transaction volume, but their fee structures differ. For people operating in the US, PayPal is often slightly cheaper, whereas for European marketplaces, Stripe's costs tend to be somewhat lower. MANGOPAY’s fees are quite close to Stripe's. Adyen is probably the cheapest option for large marketplaces, but for early companies, their monthly minimum fees might be too high.
Ease of integration is a further factor to consider. PayPal's difficult integration has become quite notorious. Based also on our experience, Stripe's integration is a lot easier. MANGOPAY comes close to Stripe, though their API documentation is not as polished and clear as Stripe's. We don't have direct experience with Adyen, but since the company targets large companies, ease of integration might not be a key value proposition for them.
We also recommend getting in touch with PSPs to test out their customer service. Your PSP is an important business partner, so you will probably spend some time talking with their customer advocates. PayPal's customer service has not had a great reputation, but lately, we have noticed an improvement. Stripe, on the other hand, sometimes has great customer service, but we have lately experienced a lot more challenges and delays. It could be that smaller companies with a more limited feature set are more able to offer better dedicated support.
A payment service provider can also bring you more visibility. After all, it is in their best interest that their customer does well.
The field of online payments is complex and changing fast, and startups with new offerings are emerging at a fast pace. It is not in the scope of one article (or even a series of articles) to discuss each prospective payment startup. However, our discussion on relevant PSPs, key features, pricing, and other important factors can support your decision-making even if you are considering PSPs not mentioned in these articles.
Most of all, we hope that after reading these three articles, you feel more confident about making an informed choice regarding the payment service provider for your marketplace.
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