Collecting funds on behalf of third parties: everything you need to know to get started

Creating your own marketplace, or switching from an e-commerce model to a marketplace, means guaranteeing the security of transactions between buyers and sellers, guarding against malicious attacks, and complying with national and international regulations. It means taking on the operator role with several responsibilities, particularly collecting funds from buyers and paying them to sellers. So how do you go about it? We'll tell you all about it!  

Collection of funds on behalf of third parties: what is it?

Managing transactions between buyers and sellers in a marketplace is not as simple as it sounds. It is a regulated activity which requires the collection of funds on behalf of third parties.  

Collection of funds on behalf of third parties: definition

In a marketplace, the principle of third-party collection is simple. When a buyer places an order, the marketplace collects the money before transferring it to the seller, in the same way as an intermediary. In this way, the marketplace acts as a trusted third party, guaranteeing that the transaction runs smoothly. In practical terms, the trade works as follows:

• The buyer places an order and buys on the marketplace;
• The money is received by Lemonway, which credits the corresponding amount to the merchant's payment account in its books, in certain cases after deducting a commission;
• Lemonway holds this money in an "escrow account" in its name to safeguard the merchant's funds;
• In accordance with the payment terms agreed with the merchant, the money is transferred from the merchant's Lemonway payment account to the merchant's bank account.

On paper, collecting on behalf of third parties looks simple. But in reality, it's much more complex! Setting up a system that secures all financial flows and complies with the regulatory framework in force is essential. The fight against fraud and swindling, consumer safety and respect for the confidentiality of financial data are all factors to be considered when managing third-party collections.  

Who is affected?

The collection of funds on behalf of third parties is for those who want to launch their marketplace or those who wish to develop their business by moving from an e-commerce to a marketplace model. Why should they do this? Because they become the marketplace operator and several sellers' managers. Collecting funds on behalf of third parties, therefore, becomes a major challenge.  

Collection of funds on behalf of third parties: what are the impacts?

Transferring from one account to another involves several obligations and changes: compliance with the law, new functions, reorganisation of your ecosystem, etc.  

Regulatory impact

When managing the collection of funds on behalf of third parties, several obligations must be met, particularly with regard to PSD2 (Payment Services Directive), LCB-FT (Fight against Money Laundering and the Financing of Terrorism) and the RGPD (General Data Protection Regulation). It is also essential to implement a KYC & KYB procedure to identify sellers and protect buyers' payments: the aim is to control the activity and authenticity of the various players who come to your platform to guard against fraud, identity theft, money laundering and terrorist financing. To be authorised to collect payments on behalf of third parties, marketplace operators have three options:

• Obtain accreditation: the marketplace obtains accreditation from the ACPR (Autorité de contrôle prudentiel et de résolution), an administrative authority attached to the Banque de France responsible for supervising banking establishments. This procedure is often long and complex.
• Obtaining an exemption from authorisation: this option is only available to marketplaces with a "limited range of products and services" or "for a limited network of people", a criterion that the ACPR is the sole judge of.
• Rely on a Payment Service Provider (PSP) such as Lemonway, which holds a licence: the PSP handles all payment services and controls the origin and destination of funds collected on behalf of third parties.

Whichever regulatory option you choose, collecting on behalf of third parties has technical and organisational implications.   

Technical Impact

Moving from an e-commerce to a marketplace model, or creating your marketplace, requires you to implement new technical processes for managing the collection of funds on behalf of third parties. Even if you already have a Pay-in module or an online payment system on your e-commerce site, you must opt for a tool to pay the funds to the sellers. The solution? A Pay-out module that allows you to redistribute the money collected.  

Organisational impact

Finally, collecting funds on behalf of third parties involves putting in place an entire organisation to comply with regulations, meet technical constraints and develop the business seamlessly. This organisation needs to be in-house, but it also needs to be thought through in terms of an ecosystem. Surrounding yourself with the right partners is important to save time, comply with regulations, ensure good relations between buyers and sellers, and secure all transactions. What is the best option? Enlist the support of a PSP specialising in marketplaces, capable of managing international financial flows to develop your business.

How do you collect funds on behalf of third parties?

Given the technical and organisational complexity of third-party collections and their regulatory obligations, it is essential to draw on cutting-edge expertise.  

CASE 1: You are setting up your marketplace.

Have you identified your target market and determined your business model for launching your marketplace? Now is the time to enlist the support of a team of experts who will be with you every step of the way as you develop your platform. With Lemonway, a French payment institution approved by the ACPR, you can access Pay-in, KYC/KYB and Pay-Out modules that comply with the strictest regulations. You can also take advantage of variable and competitive costs: as your business evolves, our packages and preferential rates will make you more profitable quickly. When you choose Lemonway, you can be sure that we'll monitor your needs as closely as possible and have the technological resources to support the growth and scalability of your marketplace. This saves you valuable time and gives you peace of mind when launching your platform.  

CASE 2: You are moving from an e-commerce to a marketplace model.

Would you like to add a new dimension to your business by moving from e-commerce to a marketplace? Discover a unique offer developed by Lemonway that adapts to your existing e-commerce and can be configured by adding the modules required for your new platform. The key advantage? A modular API that separates your Pay-in module from the new features essential to your platform and supervised by Lemonway: KYB, Pay-out, payment account management (blocking of funds, creation of payment accounts, intuitive dashboard, etc.). So, unlike traditional payment solutions, you control your payment experience from A to Z and guarantee your customers safe and secure transactions! This modular, flexible solution from Lemonway has already won over major retailers such as Décathlon and its thousand onboard merchants. Do you need help collecting funds on behalf of third parties? Then get in touch with us!