Marketplace payment solutions: How to choose the right one

Modulr By Modulr on 12 July 2023   •   15 mins read

If you work in operations at a fast-growing marketplace, you may be looking for more advanced payment solutions to improve your customer experience. Some of the most prevalent and recurring payment problems you’re running into may revolve around:

  • Not being able to instantly settle payments between buyers and sellers.

  • Manual transaction processing that is time consuming, costly, and limits your growth.

  • Wanting to offer more than just card payments while avoiding having to deal with multiple payment providers.

  • Payment notification delays that make reporting harder and harm your user experience.

  • Lack of control and visibility on end-user transactions and movement of funds. 

We spoke with Nick Adams – Modulr’s Director of Business Development – to understand how the right payment system can be a game changer for growing marketplace platforms. In this article, we’ll explore: 

Modulr is on a mission to unlock embedded payment solutions for growing marketplaces across Europe. Ready to transform the way your marketplace handles payments? Contact us today to see how we can help you. 

How to choose the right payment solution for your marketplace

Picking the right marketplace payment platform is crucial to ensure your product growth strategy has the best chance of success. Here are three points worth considering when looking for a new solution for your online marketplace payments. 

1. Look for API-first payment solutions that allow you to scale quickly

There’s a good chance that application program interfaces (APIs) are already powering multiple services on your marketplace. If they’re not already, APIs can power your payment services, too. Using an API for payments enables you to: 

  • Access fast, reliable marketplace payment processing

  • Accept multiple payment types through a single connection

  • Automate payment and settlement journeys

  • Streamline payouts

  • Leverage notifications to gain valuable user insights and deliver immediate updates to buyer and sellers

Using different payment providers for each payment method creates extra work for your tech and reconciliation teams. If the payment solution involves using iframes or pop-ups, it also forces your designers to modify your well-crafted UI. With the right provider, however, you can accept multiple payment sources from the same API while minimising your developers’ and designers' workloads.

The right payment API can also transform the way you manage the payment experience while reducing payment processing times for finance teams. With webhook notifications, marketplaces can know exactly when a customer makes a transaction. And automated rules let you update statuses both internally and for your users.

For example, if a payment occurs, you can notify the seller immediately of their incoming funds. The webhook can also update your bookkeeping system. That way, whenever payments take place, you can update your records automatically.

For marketplaces looking to enhance their payment service, automation through APIs isn’t just nice to have, it’s essential.

2. Work with a provider offering multiple payment services with minimal disruption

While debit and credit cards are convenient for customers, they come with lots of downsides for marketplaces, such as revocable payments, delayed settlement, chargebacks, fraud risks, and high transaction fess for payment processing.

These factors impact not only your bottom line but also harm your user experience (UX). Fortunately, there are multiple global payment options that offer better UX, lower costs, and enhanced security for marketplaces. These include:

While all these online payment methods represent an improvement over cards, the last one – instant transfers between internal customer accounts – can be a game changer. We’ll cover this payment method in more detail later on.

If your goal is to meet the evolving needs of your marketplace customers, then it’s essential to work with a payment service provider who enables you to accept multiple payment mediums.

Also, look for a payment solutions provider that enables you to build and scale your products so they are secure and compliant with regulatory requirements. That way, you can work to minimise your operating risks while creating a safe space for your customers. 

3. Find a payment provider that can support you as you build and evolve

Payment technology can be revolutionary for your marketplace, but only if you know how to use it to its full potential. The leading marketplace payment solution providers are the ones that can support you and your tech team from ideation to implementation and beyond.

When selecting one, you’ll want to ask how much support your product, development, risk and compliance teams will receive as you build your solution. That way you can transform your marketplace’s payment infrastructure knowing full well you’re getting the most from the underlying tech.

This level of support becomes even more important as your business evolves. Your product and client-success people are constantly listening to your customers’ feedback. They’ll no doubt give suggestions on how to further improve your payments experience. With the right support, your payment solutions provider will play a key role in seeing those ideas come to life, just as your customers envision it.

In the following section, we’ll take a look at how we do that at Modulr.

How Modulr helps online marketplaces succeed with payments

Modulr is a leading provider of embedded payment solutions for growing B2B, B2C, and C2B marketplaces.

Here are just seven of the top features and functionalities our biggest marketplace clients are using with Modulr.

1. Create accounts on demand for instant and secure payments

Our accounts on demand service lets you open accounts that sit within our regulated infrastructure for each one of your customers. Since these are internal accounts, payments can happen between them instantly 24/7, 365 days a year.

To move funds between accounts, you can set up payment-event rules and webhooks to automate transaction flows and generate notifications, which you can use to update your finance teams and your customers. Settlement is final in these accounts. Once a buyer makes a payment, they can’t initiate a unilateral chargeback, saving your reconciliation team hours of work.

What’s more, accounts on demand aren’t just for internal transactions. Each one comes with either an IBAN for euro payments or a sort code & account number for British pound sterling transactions. This enables your customers to transfer money into and out of their accounts with you to the external ones of their choosing.

For example, Liberis, the business finance provider, used to have a very manual, overnight process to set up customer accounts, which meant funding a customer took a long time. With Modulr’s integration, the two-day funding process was reduced to just ten minutes, and Liberis achieved a 35% decrease in payment processing costs.

Read the case study: How Liberis used payments automation to reduce operational costs by 35%, powered by Modulr

2. Use our APIs to automate manual processes, like payouts and fund transfers between parties

Modulr is an events-based payment platform that automates your payment flows. Our technology allows you to go far beyond just accepting payments, making payouts and holding funds. Instead, you can use our API to trigger different events on your platform to automate large parts of your customer experience.

For example, say that you need to split payment from a buyer between:

  • Yourself for commission.

  • The seller.

  • A parcel handler.

With predefined rules, you can pull the funds from the buyer’s account, take your commission, send the shipping fees to the logistics company and payout the remaining amount to the seller, all based on your predefined rules. Our APIs even make refunds simpler and more immediate.

The benefits here are three-fold. First, you minimise risk because payments don’t go missing because of manual errors. As a result, your reconciliation team isn’t spending valuable time chasing down errant payments. These benefits add up, reducing overhead costs, and freeing your teams to focus on more value-adding tasks.

Curious to get your developers on board? Have them check out our sandbox and technical docs.

3. Enable multiple payment methods through our API

Here at Modulr, we can offer you more than access to a marketplace payment gateway and connection to the major card schemes. We support multiple payment methods that your customers want, including:

All these payment methods are available to you and your customers via API integrations. If you need to add one, you can do so with minimal disruption to your existing user interface (UI) design and tech stack.

See our full list of payment methods: Payment Types

4. Track and reconcile your marketplace payments instantly

Our API acts as a two-way communication tool thanks to the ability to both request payment information from us and receive notifications as soon as a payment event happens. We do so in two ways:

  1. Webhooks.

  2. Calls.

Our webhooks will send your system a message whenever a payment or other event occurs in our system. You can use this data to update your system or trigger another event in your customer journey. If you need payment or other data on-demand, you can simply send us a call message through the API, which will immediately return the data requested.

5. Get peace of mind as you scale thanks to our regulatory licences

We offer GBP and EUR accounts, so you can access the one you need when you’re ready to go beyond local payments and scale into new markets.

We’re licensed as an electronic money institution by both the Financial Conduct Authority in the United Kingdom and De Nederlandsche Bank in The Netherlands for EU access. With card payments, we also have PCI compliance Level 1 and fraud protection and prevention measures in place. These authorisations mean your funds are safe and have the full support of the relevant market authorities.

As a regulated entity, we also adhere to the strict guidelines laid out by the regulators. For your marketplace and your customers, that means additional security and peace of mind as you grow.

6. Receive support from day one to ensure your success

As soon as you join us as a partner, we assign you a team of experts that make implementation and operations a pain-free experience.

This small team of compliance, tech, project, and business experts starts by giving you a clear roadmap of what your journey will look like. We also help you fully understand how our systems work and all the exciting opportunities our tech can enable.

During implementation, our teams are there to support you as you build. Once you’re launched, they’re ready to answer questions you may have and help find solutions for your future business needs.

Learn how Modulr can embed your accounts payable via our API for error-free invoice payments.

7. Future-proof your payment infrastructure

Speaking of the future, we’re always adding new features based on our customers’ feedback. Many of them are the biggest digital brands in the UK, which helps keep us at the forefront of payment innovation.

Whenever we roll out a new product or feature, we’ll be happy to walk you and your tech team through any questions you might have and help you think of ways you can best use them on your marketplace business or e-commerce platform. With Modulr, you can be sure to find a solution that meets your business model.

How Modulr transformed a leading B2C marketplace in the UK

One of our multi-vendor marketplace customers is a B2C platform that helps consumers sell physical goods to resellers. The service works like this:

  • Once a business buyer and a seller agree on a transaction, the business buyer sends a courier to pick up the goods.

  • The courier then inspects the goods, settles the terms of the sale, and clicks to confirm on the app.

  • The funds are then supposed to go from the business buyer to seller, enabling the courier to leave with the goods and the seller to walk away with the proceeds.

At this last step, the customer experience quickly ran into some friction points as payments could take hours to complete, which meant the courier could end up waiting hours before leaving with the goods.

Feedback from their customers confirmed to the C-suite that the way they handled payments needed an overhaul. In fact, it was so serious to them, the CEO directed the company to hire a “head of payments” to solve that problem.

Once on board, the new payment lead set about reinventing the experience with Modulr. At onboarding, the marketplace received a dedicated squad of Modulr experts across all domains – technical, business, compliance, and project – who helped the marketplace’s tech and product team roll out the payment solution.

The results were immediate: payments between buyers and sellers settled instantly. Now, once the parties agreed to the final terms and the courier clicked ‘confirm,’ it sent a message to Modulr via an API call. That message initiated the transfer, immediately moving the funds from the buyer’s marketplace account to the seller’s. Seeing the funds clear right then and there, the driver and seller were free to go on their way. 

Customer feedback affirmed that the marketplace had solved a pressing pain point. Thanks to Modulr’s payment solution, the platform could continue on its ambitious growth strategy as the C-suite had intended.

Want to know more about our different use cases? Check out our case studies.

What the right marketplace payment solution can do for you

The right marketplace payment solution will be more than a partner: it can completely reinvent your business model. Here’s what’s possible with the right payment partner:

Enable instant payments and improve your customer experience

You may be familiar with this situation: spending hours manually reconciling funds received from buyers into a central account and then distributing them to the relevant seller. It’ll likely take two to three days for that money to arrive in those bank accounts, and since many marketplace payments are one-off, you’re spending human resources on processing payments.

With the right payment solution, those payments can be automatically reconciled, with immediate notifications of funds received, and processed instantly all via a suite of APIs.

For example, suppose your platform lets your customers buy and sell used musical equipment in local communities. After finding each other on your marketplace, a drummer looking for a new drum kit will go to a seller’s house to inspect the set he has on offer.

Once the two parties agree on the price, the buyer can immediately transfer the funds to the seller’s account. The payment settles immediately to the seller, letting the buyer walk away with his drum set without waiting around awkwardly for a card payment to clear.

From your perspective, your finance department and user interface will also benefit from seeing transactions as they occur. Reconciliation times and costs go down, while notifications are instant and customer journeys speed up.

Learn more about this type of payment method: Account services

Save money on card payments

Once your marketplace reaches a certain scale, card payments start getting expensive, especially as average transaction values increase. Card payments also bring in chargebacks and higher rates of fraud. That’s when it pays to have a marketplace payment partner that can allow you to accept other types of payment methods, such as account-to-account payments.

With the right payment provider, you can offer your marketplace users more payment methods that will save you money in the long run. 

Unlock new revenue opportunities

Scale to new regions: Having to source and connect to different payment providers for every new country you scale to only adds to your overhead costs. Worse, it prevents your product team from creating a homogeneous experience across all your domains.

If your payment provider operates in multiple countries, they’ll allow you to scale and expand to a new country. For example, a payment provider that can offer EUR accounts will allow you to accept customers in the European region. By working with a marketplace payment solution provider who can operate wherever you do, you can protect your UX, brand and bottom line.

Set up the right payment infrastructure: Managing payments as a marketplace that manages £1 million in transactions every year is very different to one that manages £500 million in transactions. You need to have the compliance measures in place to reduce chargebacks and fraudulent charges. You also want to make sure uptime is 24/7 and reconciliation is fast and accurate. Since online payments sit at the nexus of your marketplace, a top payment provider will help you build out the payment infrastructure you need to reach those goals.

Adapt to consumer trends: Payment technology and customer preferences are in a state of constant evolution. As consumer trends change, your payment infrastructure needs to keep up.

For example, Open Banking enabled payments are becoming more popular: is this a payment method you’d want to set up for your company? And if so, does your payment provider enable it? Perhaps more importantly, is your provider able to simply embed the account to account payment option to ensure it is as easy or, better still, even easier than card and other premium alternative payment methods (APM). Convenience is key to consumer adoption.

Choose Modulr as the payment solution to scale your marketplace

Marketplaces work best when buying and selling between participants is as frictionless as possible. Payments represent both a major friction point and a massive opportunity to radically enhance your UX.

As one of the best marketplace payment solutions, Modulr is an expert in providing game-changing payment technology. Contact us today to see how we can help you reinvent the way your growing marketplace handles payments.