15 December 2023
As an intermediary between sellers and buyers, a marketplace is responsible for transactions and compliance with payment regulations. Collecting funds on behalf of third parties is a strictly regulated activity, with the obligation to comply with procedures against fraud, identity theft, money laundering and financing of terrorism.
Creating a single digital wallet (payment account) for each merchant or buyer is part of this framework. It makes the payment experience smoother and more straightforward to manage. But what is a payment account, and how are the transactions linked to it structured?
This is a payment account that each user must have to operate on a marketplace. The account holder – whether payer, seller, merchant or investor – can issue or receive payments and settlements on the platform. There are two categories of digital wallets.
This is the company’s single payment account (also called Wallet SC at Lemonway). All commissions are collected in this account, including the amount owed by the merchant to the platform and the portion owed by the platform to Lemonway.
This is the payment account held by each platform’s users, whether merchants on a B2C or B2B marketplace, project owners, or investors on a crowdfunding platform.
You can create as many customer payment accounts for individuals and legal entities as needed. For an efficient management, creating one digital wallet per user and per currency is advisable. Each payment account is given a unique identifier when created, making reconciling flows easier.
When a transaction is carried out on a marketplace, regulations require that the funds intended for sellers be protected within a separate account. This procedure makes it possible to protect both the buyers by isolating their money pending their order and the sellers by guaranteeing the amount due to them at the end of the transaction.
Once the buyers have confirmed the reception of the order, the money is released from the escrow account and paid into the seller’s payment account. A commission may be charged in some instances.
From a technical point of view, creating a payment account requires specific information about the user’s identity and contact details.
To create a digital wallet for a legal entity (a company), the following information must be provided:
In addition to this information, it’s advisable to provide the registration number, telephone number and URL of the project or payment account holder.
To create a digital wallet for an individual, the required information is quite different:
The account holder’s main telephone number and title are also recommended.
Identity verification is a regulatory requirement designed to fight against money laundering and terrorism financing (AML/CFT). It is therefore essential to open a payment account, mainly so there are no restrictions on the number and amount of transactions (Money-In, P2P and Money-Out). The marketplace is responsible for collecting the required documents from its customers in accordance with the rules imposed by national regulators, like the ACPR in France or the BaFin in Germany. There are two types of procedures.
To find out more about the KYC and KYB documents, you can have a look at our article “What are KYC and KYB”
On marketplaces, all sellers are subject to verification procedures. The same applies to equity crowdfunding platforms, where each user’s identity is verified before the payment account is validated.
When a payment account is subject to a financial security check, it may be temporarily frozen to secure transactions and ensure compliance with regulatory obligations. A digital wallet will also be blocked if the holder is on the financial and international sanctions lists regarding frozen assets.
As a turnkey payment solution and holder of a pan-European payment authorisation granted by the ACPR (the French regulatory authority), Lemonway supports marketplaces in creating and managing payment accounts, protecting and collecting funds, and all this in complete compliance with regulations. Lemonway also takes care of the payment interface, security and technical elements.
Contact us to discover Lemonway’s ecosystem to make your marketplace payment experience more fluid and secure.
