Written or reviewed by Libby James, founder of Merchant Advice Service and specialist in merchant payments and complex provider requirements.
Tell us about your business, current payment setup and what you're looking to change. We'll use it to understand your requirements before identifying providers that may be suitable.
A marketplace payment setup is more complex than a standard ecommerce gateway because the platform is connecting customers, sellers or service providers, payments, commissions and payouts.
A suitable marketplace payment provider may need to support:
The payment gateway is therefore only one part of the marketplace payment infrastructure.
The more important question is often:
Who is the merchant, who receives the customer money, who is responsible for the transaction and how does the seller ultimately get paid?
Those decisions should be understood before selecting a marketplace payment provider.
This guide is primarily for established or scaling:
A conventional ecommerce business selling only its own products normally requires a different payment structure.
A standard payment gateway helps a business transmit payment information between its checkout and the payment-processing infrastructure.
A marketplace needs considerably more.
The business may have:
A marketplace payment solution therefore normally combines gateway technology with an underlying platform-payment or acquiring structure.
That infrastructure can determine how sellers are onboarded, how transactions are allocated and how funds reach each participant.
Split payments are an important part of many marketplace payment systems, but they are only one part of the overall architecture.
For example, a £100 customer transaction might ultimately need to account for:
but the marketplace must also determine:
Our Split Payments guide looks specifically at the mechanics of allocating transactions, commissions and payouts.
Before comparing payment providers, map exactly what happens to the customer's money.
A simplified marketplace journey might look like:
customer pays → payment authorised → seller allocation recorded → marketplace commission allocated → payment costs allocated → funds become available → seller paid out → platform reconciles transaction
But not every marketplace follows that model.
Questions to answer include:
The answers can materially change the appropriate payment structure.
This requires particular care.
The FCA has specifically highlighted online marketplaces and businesses that bring sellers and customers together when explaining when a business may be providing regulated payment services.
If a marketplace receives customer money into an account in its own name before passing that money to a seller, the business may be providing a payment service.
That can include funds received through:
This does not mean every marketplace automatically needs to become an authorised payment institution.
However, it does mean the flow of funds should be reviewed before a marketplace builds its own method of collecting customer money and distributing it to sellers.
A specialist marketplace payment provider can often provide the regulated payment infrastructure so that the platform does not simply collect seller funds into its ordinary business bank account.
Businesses unsure whether their model constitutes a regulated payment service should obtain appropriate legal or compliance advice.
The Payment Services Regulations contain exclusions which may be relevant to some marketplace structures, including the commercial-agent exclusion.
However, marketplaces should not assume that simply describing themselves as an “agent” means the exclusion automatically applies.
The actual contractual and commercial relationship needs to be considered.
For a complex marketplace, it can be sensible to review:
MAS does not provide legal advice, and marketplaces should obtain specialist advice where their regulatory position is unclear.
Marketplace terminology varies between providers, but most businesses should understand three broad approaches.
The marketplace integrates with a provider specifically designed to support platforms.
Sellers or service providers are onboarded into the provider's infrastructure and verified before they can receive payouts.
The payment provider may then support:
This is a common model for digital marketplaces and platforms.
Some businesses operate commercially as the customer-facing seller rather than simply introducing a buyer to an independent third-party seller.
This can create a very different payment and legal structure.
The contracts, refund obligations, tax treatment, customer relationship, card-scheme position and regulatory analysis should all reflect the actual model.
A marketplace should not simply declare itself the merchant because doing so appears to make the payment integration easier.
Some platforms use a Merchant of Record structure.
A Merchant of Record generally takes responsibility for the customer transaction within the commercial model, potentially including areas such as payment acceptance, refunds, disputes and other merchant obligations.
However, “Merchant of Record” is not merely a gateway feature or a setting that can be turned on in a payment dashboard.
The contractual, tax, regulatory and operational consequences need to match the actual structure.
Some businesses use specialist Merchant of Record providers rather than becoming the Merchant of Record themselves.
A marketplace payment provider normally needs to understand who is receiving money through its infrastructure.
This commonly means verifying sellers, service providers or contractors before they can receive payouts.
The information required can depend on:
For individuals, verification may include identity information.
For businesses, the process can include company and beneficial-ownership checks commonly described as KYB — Know Your Business.
A marketplace can have an excellent shopper checkout and still lose growth because seller onboarding is difficult.
Seller onboarding should therefore be treated as a product journey rather than purely a compliance exercise.
The marketplace should establish:
For a fast-growing marketplace, the quality of the seller-onboarding API and workflow can matter as much as checkout conversion.
Some providers allow the marketplace to send sellers to a provider-hosted onboarding journey.
Others provide APIs allowing much more of the experience to sit within the marketplace's own product.
A hosted approach can reduce development work.
An API-led approach can offer greater control over branding and the seller experience, but generally requires more implementation work.
Before choosing, consider:
A provider agreeing to work with the marketplace itself does not necessarily mean every seller can be accepted.
The provider may also have restrictions based on:
This is especially important for marketplaces with a mixed seller base.
For example, a marketplace may itself be straightforward while some underlying sellers operate in higher-risk or regulated sectors.
Before selecting a provider, share a realistic picture of the seller portfolio rather than simply describing the marketplace's own company activity.
Many marketplace payment providers can allocate a customer transaction between different balances.
This can allow the platform to separate:
For example:
Customer pays £250 → seller allocation £220 → marketplace commission £25 → payment/platform costs £5
The exact booking of these amounts depends on the provider's infrastructure and the commercial agreement.
The important point is that the platform should be able to trace how the original customer payment became the subsequent seller payout.
Potentially, yes.
Marketplace payment providers can support models where the platform's commission is allocated as part of the transaction or balance flow.
The marketplace needs to define:
Do not assume commission logic belongs entirely inside the marketplace's own database.
Where possible, transaction and payment records should make the financial allocation clear enough to reconcile later.
Payment collection and seller payout are two separate parts of the marketplace payment journey.
The marketplace should decide:
Payout functionality can become a major part of the seller proposition.
Not necessarily.
A marketplace should consider when the underlying service or product has actually been delivered.
For example:
Paying sellers immediately can create a funding problem if the customer later receives a refund or raises a chargeback and the seller no longer has sufficient balance.
Payout timing should therefore reflect the business model and provider risk requirements.
Some marketplace payment structures use reserves, delayed availability or other controls to manage transaction risk.
These can operate at:
A marketplace should understand:
Find Suitable Marketplace Payment Providers
Refund architecture should be designed before the marketplace launches.
Consider a customer who pays £100:
If the customer later receives a £100 refund:
Different providers and marketplace agreements can treat these scenarios differently.
The platform needs a defined policy and appropriate technical logic.
Chargebacks can be more complicated in a marketplace because several parties are involved in one commercial journey.
The marketplace needs to understand:
Relevant evidence may sit across several systems:
The dispute workflow should bring this information together efficiently.
Read our Chargeback guide for wider information about card disputes.
Negative balances are an important marketplace issue.
A seller might receive a payout and subsequently incur:
If the seller has insufficient funds remaining, the marketplace needs a process for the shortfall.
Depending on the payment-provider setup, options may include:
The liability model should be understood before scale makes negative balances a significant financial exposure.
A marketplace has more than one type of fraud risk.
It may need to monitor:
This means shopper-payment fraud tools alone may not be enough.
Marketplace risk controls can also include:
Verification is not necessarily a one-time event.
A marketplace can change over time.
A seller may:
The platform and payment provider may therefore need processes for ongoing monitoring and updated verification information.
A marketplace should not assume that a provider will accept every category of underlying seller.
This is particularly important where the marketplace includes businesses operating in sectors such as:
Provider appetite should be established using the actual seller mix.
A marketplace may otherwise spend substantial development time integrating a provider only to discover that an important seller category cannot be onboarded.
International expansion can make marketplace payments substantially more complex.
The platform may need to consider:
Seller onboarding requirements can vary according to both country and legal entity type.
A provider that supports UK sellers should not automatically be assumed to support every market on the marketplace's expansion roadmap.
International platforms should distinguish between:
If currency conversion occurs at several stages, FX can become a material cost.
The marketplace should understand:
Cards may be the main payment method for a UK marketplace, but expansion may create demand for local payment methods and wallets.
Before adding one, establish:
Not every payment method behaves identically within a marketplace architecture.
For larger marketplaces, the API can be as important as commercial pricing.
The platform may need APIs for:
Webhooks are also important because the marketplace needs to know when events occur outside a direct API request.
Examples can include:
Read our Payment API Integration guide for more information about designing an API-led payment setup.
Marketplace payment architecture should be designed with the finance team as well as the product and development teams.
A marketplace may need to reconcile:
customer → order → seller → gross transaction → marketplace commission → payment fee → refund → dispute → seller balance → payout → bank settlement
At scale, small reconciliation gaps can become a major operational problem.
The marketplace should establish whether provider reporting includes:
Before choosing a provider, ask the finance team what they actually need to close the books.
This may include:
A technically strong checkout can still create substantial manual work if the settlement data is difficult to reconcile.
Safeguarding is a regulatory concept that applies to relevant funds held by certain regulated payment and electronic-money institutions.
It should not be confused with a bank deposit protected by the Financial Services Compensation Scheme.
Where a marketplace payment provider operates through an authorised payment institution or electronic-money institution, the provider may be required to safeguard relevant customer funds according to the applicable regulatory rules.
A marketplace should understand:
For complex payment flows, the marketplace should obtain appropriate legal and compliance advice rather than assuming all funds described as “held” receive the same regulatory protection.
“Marketplace” and “platform” are often used interchangeably, but a payment provider may make a technical distinction.
A marketplace generally connects customers with third-party sellers or service providers.
A software platform may instead provide business software to its users and allow those businesses to accept payments through the platform.
For example:
The technology can look similar, but the commercial relationship and payment structure may be different.
Payments can become more than a cost centre for a marketplace or platform.
Depending on the provider and commercial model, the platform may be able to:
However, payment monetisation should be designed alongside the regulatory and contractual structure.
The fact that a platform can technically add a fee does not by itself establish that the commercial or regulatory model is appropriate.
This is an important distinction for businesses planning marketplace payments.
Using a platform-payment provider does not automatically make the marketplace the Merchant of Record.
Likewise, describing the marketplace as Merchant of Record does not remove the need to understand:
The choice between marketplace, platform and Merchant of Record structures should therefore be made at business-model level, not merely during gateway implementation.
Changing a marketplace payment provider is usually more complicated than changing a gateway for a single merchant.
The marketplace may need to consider:
Do not terminate the existing platform-payment setup until the migration plan covers historic transactions as well as new ones.
Our Changing Payment Gateway guide explains token and stored-payment migration in more detail.
Not always.
One provider's verified seller account is not necessarily portable into another provider's infrastructure.
The new provider may need to:
For a marketplace with thousands of sellers, onboarding migration can therefore be one of the largest project risks.
Providers can assess a marketplace much more effectively when the business presents the full model clearly.
Prepare:
Before selecting a provider, ask:
Marketplace pricing is usually more complicated than a single transaction percentage.
Potential costs can include:
A marketplace processing £50 million per year with thousands of sellers should not compare providers in the same way as a single ecommerce merchant processing £50 million through one merchant account.
The operational and technical economics matter as well as the card rate.
Build the comparison around the marketplace's actual operating model.
Compare:
The lowest headline processing rate may not be the best choice if the provider creates substantial seller-onboarding friction, manual finance work or technical limitations.
Find Suitable Marketplace Payment Providers
Before comparing providers, MAS recommends mapping five areas.
Who pays, from which countries, using which payment methods?
Who receives the money, where are they based and what types of businesses are they?
How is each payment allocated between seller, platform, fees and other participants?
When is the seller paid and what happens if a refund or chargeback occurs later?
How will onboarding, checkout, payments, payouts, risk and reconciliation connect with the marketplace's own systems?
Once those questions are answered, the business can compare marketplace providers on architecture and fit rather than simply comparing gateway pricing.
Merchant Advice Service (MAS) provides independent information, comparison and provider-matching support for UK businesses looking for payment services.
We help businesses understand their payment requirements before introducing them to providers that may be suitable. MAS does not provide payment processing services directly.
Disclosure: Merchant Advice Service may receive commission from payment providers following a successful introduction. This does not increase the price paid by the merchant and does not determine which providers are included in our editorial guidance.
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Libby James is the founder and Managing Director of Merchant Advice Service. Since 2016, she has worked directly with businesses and payment providers across merchant accounts, card processing, payment gateways and complex provider requirements.
Libby specialises in high-risk, declined and harder-to-place merchants, as well as businesses requiring specialist payment methods, integrations or international support. She writes and reviews Merchant Advice Service content, drawing on practical experience gained from real merchant enquiries and provider relationships.
