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How To Select Your Payment Provider

Let's Dive into the Intricacies of Payment Provider Solutions and Scenarios
Empower your Vendors, Protect your Customers

First Marketplace Payment Provider Considerations

Today we will be going to dive into marketplace payment providers and different payment providers that can be set up.

So, the payment provider capability within a marketplace eCommerce platform is a key requirement because, depending on the marketplace, the sellers may need to have multiple different forms of payment or different sellers may need to have different payment providers that they have to process their payments. With that in mind, this provides a flexible solution to your sellers with what payment provider works best for them.

In addition, it's also possible that the marketplace itself may want to employ a really specific payment strategy. For instance, when somebody goes to checkout their card is pre-processed, making sure that the card has funds on it but without actually capturing the funds. The funds might not get captured until fulfillment occurs or in some cases until the actual delivery is made.

Let's Look Behind the Curtains

Diving into Payment Logistics

So, just to dive into the logistics behind some of these pieces, the concept is in order to scale and grow your marketplace you want to make sure that you have a flexible infrastructure that can service a variety of sellers. If a seller doesn't meet the criteria for a selection of different payment providers, they will only be able to apply for those specific providers. This is something you should be aware of that you might need to have in the future and certainly if you do need any of these areas in the immediate future, you'll know more about them during your discovery process.

When evaluating different platforms, marketplace payments can be as simple as setting up a single payment provider like authorize.net or Chase payment tag but ultimately setting up a single payment provider is pretty vanilla and not necessarily complicated. However, whenever you start to process a lot of transactions and you're doing a lot of business you'll find there can be issues with security, specifically where there might be fraudulent charges happening on the application. This can create a higher rate of risk even for the payment provider. Even with their incentive to wanting to provide payments or provide the clearinghouse for payments, this is something they are going to quickly avoid.

So, there's some logistics around scaling your marketplace and making sure that you don't have fraudulent charges. There are a lot of things you can do to prevent security breaches, including third-party applications that can monitor the platform. That is something we can easily turn on to audit and review the transactions before they go through, but it's also possible to incorporate address validation and other forms of validation such as requiring user to click a link in a valid email and use that as part of their validation process. Many cases with the marketplace you may have specific domains that are waitlisted. Those waitlisted domains have to be approved before someone can sign up and register with the application.

That would be an example of a pretty detailed step that someone could complete but ultimately the idea being that if you have a single payment provider, you'll probably encounter the need to deal with fraudulent charges and ways to prevent those. One solution is to configure and enable a robust database that looks at suspected IP addresses to prevent obvious folks from being able to make a fraudulent payment and flag credit card information.

Protecting Your Customers & Vendors

Data Security & Validation Practices

All of that to say, these are important considerations when you're looking at the different payment providers because some of them have capabilities built-in and some of them do not. You will want to address that early on as they typically are looking for security validation, PCIDSS compliance (payment card industry data security standard), and for the payment provider to not pass secure information over the wire that isn't SSL and Chrome 58. Nowadays, you're wanting to make sure that the information is tokenized and validated while not being stored within your application.

When it comes to the many nightmare scenarios of credit card information insecurity, we’ve come across a number of more troubling cases. In example, we were brought into a project where this information had been stored in different folder applications which were plain text files. So, if you can imagine the database were compromised somehow or the application was breached, then that database with plain text credit card information could be used to utilize those credit cards.

These are things that you want to consider when you're evaluating a marketplace platform:

  • How to the store that data?
  • How do they prevent it from getting into the wrong hands?
  • Are there multiple levels of security instead of just a single layer?

The list goes on when it comes to data security, but these are the first few questions you will be needing to answer when making a final decision on a solution.

Now when it comes to multiple payment providers, as you can imagine, you have to be able to deal with all of these considerations that we just mentioned, but now for multiple different payment providers. Will the platform you select be able to handle that? Make sure that they have a valid configuration for their different requirements that your platform is architected so it can handle the needs of your sellers.

A lot of marketplace implementations that we've done in the past have incorporated the need for a different payment provider by location per seller. Some sellers will have different locations to each require a different payment provider and those might be the same provider themselves but with different pretenses.

Advanced Processing & Customer Satisfaction

Escrow Payments, Clearinghouses, & Payment Validation

So, the question would be now as you're evaluating this need is which of the payment providers do you expect to use within your marketplace. Many clients don't necessarily have a selected payment provider and in that case, we like to ask questions about whether or not they need to do complicated things down the road like escrow payments upon validation of the items. In other words, the buyer actually puts a payment into escrow, the payment provider serves as a clearinghouse if you will, validating that the payment went through. Then they put the funds into an escrow account physically locking those funds up, capturing them and making sure they are not available to the seller until the items have arrived at the buyer and the buyer has verified, “Yes, I approve. These items are what I ordered”. This is something that confirms for the buyer that they're going to get the quality and the expected item. With a lot of international marketplaces this can be a major concern for the buyer. As a marketplace platform, enabling the right governance for your marketplace you will want to leverage a payment provider that has something like an escrow option.

Figuring out Where to Start

Questions to Ask Yourself

In addition to that there might also be the need to set up a payment provider that has the ability to pay out the vendors or the sellers on the application. If that's the case, the question would be what business logic components we need to incorporate for paying the sellers. Do you want to try to pay the sellers as part of the transaction or do you want to pay them monthly or weekly? Depending on the marketplace those are considerations from the logistics perspective that we suggest considering upfront:

  • How do you want the sellers to be compensated?
  • Are they going to get a percentage of each of the payments that goes through from the buyer?
  • Are they going to get that transferred immediately?
  • Are they going to get a percentage or amount that's going to be paid out weekly or monthly after a certain period of time and validating that that the buyer is happy with the orders?

The list of questions to ask your team is potentially endless… So, how do you want to handle that? We recommend that you dig in and get into the weeds with your team. Think about all of the different workflows that might occur and how you would need to integrate those with your marketplace platform. Know whenever you're setting up a marketplace one of the big challenges is dealing with getting folks to use the platform both on the buyer and the seller side of things, but keep in mind that one of the strengths of having a lot of different options for your payment provider, is that you can cater to different markets and optimize around those particular market’s needs.

Marketplace Payment Provider Experts

How Can Clarity Help?

So, it's not a bad idea to go and talk to some of these folks (vendors and sellers) that you're going to be interacting with and spend time with them discussing their business. Especially as it pertains to payments and how they would see filling and completing these orders. There's nothing better than getting that direct interaction with them.

Certainly, we're happy to help collaborate and even facilitate some of those conversations with you and your team. So, we welcome you to reach out to us at Clarity, we definitely have experience with a lot of different scenarios with marketplaces and can help guide you down that path. We provided links below leading to a list of growing resources specifically talking about marketplaces and there many features.

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