Stripe Atlas for marketplaces and platforms
Marketplaces enable customers and multiple sellers to interact within a single platform — e.g. Deliveroo, Etsy, or Shopify — while retaining a fee for facilitating the transaction.
Stripe Atlas can be used for marketplaces and platforms, but given that there are three parties in each marketplace transaction (the customer, the platform, and the seller) the movement of money is inherently more complex and can pose a higher risk.
Handling the movement of money for your own marketplace raises a number of challenges, given that there are three parties in each transaction - the customer, marketplace, and seller. Payments regulation in the U.S. is complex, and even more complex when one also considers the rules imposed by the credit card networks, such as Visa and MasterCard.
By ‘handling the movement of money’, we mean your customers pay you as the marketplace, you take control of the money in your own bank account, and you later pay your sellers - usually retaining a cut for yourself. This involves pretty complex accounting and tracking of who is owed what, and when. It’s often quite the divergence from a marketplace’s core offering.
This may make sense for a very small fraction of marketplaces. For the remaining majority of marketplaces, this is what is known as ‘aggregation’ - payments are commingled in your account, with no clear one-to-one relationship between any incoming payment from a customer and a later payment to the appropriate seller. Many financial institutions and the major credit card networks explicitly call out aggregation as prohibited.
In part, this is because of the significant financial risk this imposes on you as the aggregator. Your cashflow becomes commingled with money that technically belongs to someone else - your sellers. There have been more than a few examples of marketplaces that have gone bust and left sellers waiting on money they were due. You’re also responsible for any issues between the customer and sellers; if a large seller fails to deliver, you must be able to cover any money due back to the seller’s customers. If you are cashflow constrained, you then threaten the success of your marketplace participants.
This also ventures into a regulatory grey area. You are now facilitating payments between two third parties (the customer and seller), activity that may be considered regulated. Banks spend a lot of time on ensuring that their customers hold the appropriate licenses to facilitate payments. And as you can imagine, regulators also take steps to enforce payments regulation.
The marketplaces you follow or use may appear to be doing something similar - but many marketplaces have invested significantly in legal and compliance resources, and some have received licenses that allow them to do fancy things with money.
There are products available today that extract away the complexities we described above and let marketplaces focus on their core business instead of payments. These products allow the marketplace’s customers to directly pay its sellers, while the marketplace or platform retains its fee.
Atlas companies can use Stripe Connect to facilitate payments directly between customers and sellers in any of the countries where Stripe is publicly available. We can also work with you to find an alternative marketplace payment product.