How does a payment process in a marketplace work?
Answer by Dean Young:
You have at least two options.
1) Your marketplace can shoulder the burden of payouts, fraud, chargebacks, anti money laundering compliance, PCI compliance, etc.
2) or, you can partner with a payments as a service provider that could be theto your Earth.
In the former scenario, you have a lot to worry about. A lot of it is legal compliance, but the hidden aspects are all of the operations you’ll have to manage that support the payment functions. You’ll have to plan how you’re going to build customer service, risk, compliance, and security teams as you grow. With every new user, that becomes more of a challenge.
In the latter scenario, you won’t be able to control every last detail (and why would you want to after everything I just explained?), but the end-to-end experience can still be yours.
I’m heavily in favor of the second option, but maybe that’s because I’ve seen small teams build large marketplaces with little overhead on that model.
A note on chain payments / app fees:
These are commonly implemented on platforms that want to charge a fee for using the marketplace, such as a per transaction charge. In scenario one above, the fee would be taken out of the aggregated funds. In the second scenario, the processing partner takes the marketplace fee out of the transaction and sends it to the platform’s account.