Online payment solutions: How to make the right choice for my marketplace?

Choosing an online payment solution is a strategic step in the success of any marketplace, whether B2B or B2C. A wrong choice can impact the user experience, slow down transactions, or expose your marketplace to the risk of regulatory non-compliance. Conversely, the right solution can streamline payments, optimise your cash flow, and ensure compliance with current standards, such as PSD2. 

Faced with a wide range of service providers, how can you select the payment solution best suited to your marketplace? This guide reveals the essential criteria for making the right choice and have the best approach to start working with a new payment processing platform.

All you need to know about online payment solutions

What is an online payment solution? 

Online payment solutions enable marketplaces to process financial transactions between buyers and sellers. Provided by Payment Service Providers (PSPs), they facilitate collection, transaction and payment processing and funds distribution between different sellers. They also ensure compliance with regulations such as the European Payment Services Directive (PSD2) and anti-money laundering (AML) standards.

Online payment solutions are distinguished by their ability to process payments via various means (credit cards, transfers, direct debits, local currencies, PayPal, Apple Pay, etc.). They may include specific additionnal functionalities such as KYC (Know Your Customer) procedures to verify and validate user identity, dashboards and steering tools, or fraud protection management tools. These services are essential for securing financial flows and guaranteeing a smooth user experience for marketplaces.

How does an online payment solution work? 

An online payment solution acts as an intermediary between buyers and sellers. 

In concrete terms, the operation is based on 5 key elements:

1. Payment collection (also called pay-in): The PSP processes transactions according to the chosen payment method (credit card, bank transfer, PayPal, Apple Pay etc.), ensuring that funds are transferred securely to the marketplace. This includes controls such as 3D Secure authentication to secure the payment experience.
    
2. Merchant identification (also called onbarding): The KYC (Know Your Customer) process optimises the registration of new merchants while meeting regulatory compliance and anti-money laundering (AML) standards.
    
3. Wallet management: PSPs, like Lemonway, set up separate wallets for each seller, ensuring secure and transparent funds management. Each transaction is stored until it is validated, thus respecting the rules governing the segregation of funds.
    
4. Quick disbursements (also called pay-out): Once the transaction is validated, the payment solution automatically distributes the funds to sellers while deducting the marketplace commission.
    
5. A tracking dashboard: To facilitate business management, payment solutions provide a real-time dashboard for tracking and managing all transactions, commissions, and seller payments.

The benefits of an adapted online payment solution

• Enhanced security: Thanks to technologies such as 3D Secure authentication and anti-fraud systems, transactions are protected against increasingly frequent threats. Online fraud is expected to reach €1.8 billion in Europe by 2022, underscoring the importance of a secure solution.
• Simplified management of financial flows: Thanks to automated payment distribution (or breakdown), marketplaces can easily transfer merchants' funds to their bank accounts, manage commissions, and track transactions in real-time via intuitive dashboards.
• Regulatory compliance: High-performance payment solutions integrate tools for identity verification and validation (KYC, KYB), guaranteeing compliance with anti-money laundering and anti-terrorist financing regulations. They also ensure regulatory compliance.
• Enhanced user experience: By optimising the payment experience, payment solutions reduce friction during the purchasing process, improving conversion rates and the overall user experience.

How do you choose the best online payment solution for your marketplace? 

The choice of a payment solution (or marketplace payment getaway) is crucial to the smooth running of your marketplace. There are several criteria to consider when selecting the right provider. Here are the main points to consider:

1. Regulatory compliance

The first question is whether the payment platform complies with current regulatory standards, notably PSD2 (Payment Services Directive) and anti-money laundering rules (LCB-FT). A good solution should integrate compliance tools such as KYC (Know Your Customer) and KYB (Know Your Business) to verify and validate user identities. Working with a PSP supporting these processes means you can concentrate on developing your business without risking non-compliance.

2. Flexibility and modularity

Every marketplace has specific needs, and it's essential that your payment solution can "adapt" them and propose a custom integration. Some solutions offer modular APIs that allow you to adjust functionality to suit your needs, growth and future developments. The provider's flexibility is, therefore, a key factor to check. You must also ensure that the solution supports various payment methods (credit card, split payments, digital wallets such as Apple Pay, PayPal, etc.) and multiple currencies, mainly if you operate internationally and target new markets.

3. Transaction security

Fraud and cyber-attacks are major challenges for marketplaces. A good payment solution must offer cutting-edge security technologies like 3D Secure and high-performance anti-fraud systems. Protecting sensitive user data and securing transactions must be priorities for the service provider.

4. User experience

An effective payment solution must offer a smooth and straightforward user experience for both buyers and sellers on the platform. Payment page load times, interface simplicity and seamless integration with your platform are criteria that directly influence conversion rates and loyalty. A friction-laden checkout process can discourage users and undermine your marketplace's performance.

5. Assistance and technical support

The technical support the supplier offers is essential, especially when integrating the solution into your platform. A good supplier usually provides a dedicated project manager to help you understand and translate your needs into technical terms and ensure responsive support in case of problems. Providing efficient customer service is also an important asset.

6. Solution stability and API performance

The reliability and performance of the payment solution are also essential to guarantee smooth transactions and a good user experience. A stable solution minimises the following:

• interruptions, 
• processing errors, and
• malfunctions that could affect your business.

It is, therefore, essential to choose a service provider with a robust infrastructure capable of handling a high volume of transactions without slowdowns or breakdowns. 

A reliable API reduces integration times, improves developer efficiency and ensures compatibility with the external systems you use.

As a payment services provider specialised in marketplaces and platforms, Lemonway offers a modular, secure solution that complies with European regulations such as DSP2. With over 400 marketplaces and crowdfunding platforms supported in Europe, we have the expertise to help you optimise your payments and support the growth of your platform.

Please contact us to discuss your needs and find out how we can help you set up the ideal payment solution for your marketplace.