Marketplace: 5 reasons to use a payment service provider

When you create a marketplace, there are 3 different ways for you to provide payment services on your platform: become registered as a payment institution, qualify for a license exemption or use a Payment Service Provider (PSP). The latter solution, which is both flexible and secure, is the most popular amongst marketplaces. Let’s find out why.

1. The simplicity of a turnkey solution

Launching a marketplace requires finding a payment solution that is both simple to set up and secure.  It is not only an essential condition for the success of your platform, but also a way to facilitate your organisation. Thus, when choosing a registered company to offer online payment services, you are releasing yourself from various tasks, such as:

• Setting up the payment interface for buyers ;
• Collecting payments ;
• Controlling funds ;
• Transferring funds to merchants.

You are therefore saving some precious time to focus on the commercial development of your marketplace. Besides, the use of a PSP comes with a wide range of payment methods, which will be an additional argument for your customers:

• Simple payment;
• Deferred payment ;
• Payment in installments ;
• Payment by subscription.

In the same way, you can offer several international means of payment : credit card, bank transfer, direct debit ; or local means of payment : check, iDeal, etc…With all these payment options and features, you provide buyers and merchants with a user-friendly solution that makes their use of the website easier.  

2. The guarantee to meet regulatory compliance requirements

Whether in France, in Europe or internationally, regulations on transactions are being increasingly regulated. Among other things, those aim at improving the control of payments made online and on marketplaces. If you go ahead and start managing financial cash flows, you are risking a failure to comply not only with the Monetary and Financial Code, but also with global regulations if you wish to expand abroad. By using a PSP, you automatically entrust it with the management of your payments and compliance controls. The PSP may be a credit institution (bank) or a payment institution. In all cases, it holds an authorisation issued by the ACPR (the Prudential Supervision and Resolution Authority, which operates under the auspices of the Banque de France). The benefits of this are as follows:

• To avoid the application process with the ACPR: long and tedious, those applications are not systematically granted
• To accompany you in all legal obligations: directives regarding money laundering and terrorism funding (LCB-FT), useful tools for carrying out « Know Your Customer » (KYC) and « Know Your Business » (KYB) processes. At Lemonway for instance, the KYC process can be immediate for individuals and semi-automated for corporate bodies.

A PSP addresses the problem of a marketplace that would like to provide payment services itself. The PSP registers the marketplace with a local regulator, as a payment agent. In this way, it does not become a payment institution. Here again, it is therefore possible to delegate its cashflow management. 

3. Increased peace of mind by entrusting a professional with the management of your payments

While the payment service provider offers advantages in terms of time saved and compliance with regulations, it also brings peace of mind when it comes to managing transactions. As a simple payment agent, you collect the funds in the name and on behalf of the PSP. Once the transaction has been completed, the payment service provider ensures on your behalf that the merchants have received their due.  

4. The guarantee to protect buyers and sellers

One of the main problems faced by marketplaces is the protection of buyers and sellers. The latter has to be paid, while the former has to receive the expected products or services on time. In this context, the first advantage of the PSP is that its technology is based on third-party collection. Sellers and buyers are therefore reassured.   How does third-party collection work? 

1. The buyer pays for a product.
2. The funds are restricted – in escrow – by the payment service provider.
3. The seller ships its product.
4. The buyer receives it.
5. The funds are released, the seller is therefore payed.

Each party can thus be assured to receive its due or not to lose money in case of a problem. The PSP also enables marketplaces’ customers to add items to their shopping cart, offered by different merchants, and pay all at once. This system, called “one to many” is handled the same way, with funds hold for each payment, and then redistributed to the right sellers. With a PSP, marketplaces have real time access to transactions’ history and to a regular report. Features to which additional options can be added.  

5. Expand internationally with ease

Choosing a payment service provider, that is passported in a maximum of countries as soon as you launch your marketplace, contributes to putting all chances on your side. You will therefore be able to easily succeed in your internationalisation when the time comes. As an expert in regulatory requirements and well aware of the legal framework for international payments, the passported PSP will save you some precious time. PSPs usually offer multiple payment methods and a large range of currencies to support the international expansion of the platforms they work with.

With Lemonway, you are choosing a complete and agile passported PSP, on which you can rely for the global and secure management of your marketplace’s payments. Guided by our experts, find out how you can ease the journey of both your sellers and buyers, and increase your revenue. Get real time access to the transactions through a dedicated dashboard and secure them all along!