4 Best Payment Solutions for Online Marketplaces

Did you know that payment solutions for online marketplaces can shape your e-commerce business and its success? Thus, Uber succeeded in its global expansion right after it switched to Braintree.

In early Uber’s scaling, even a dollar-euro currency conversion wasn’t available. Now, with Braintree, it processes mobile payments in 130 currencies in 80+ countries.

Of course, each marketplace faces its own payment challenges. So, you should rely on a payment solution with the features vital right for your e-commerce platform. To identify them, let’s dig deeper into two-sided marketplace payment processing, and analyze the best payment gateways for marketplaces.

What should you know about payment solutions for online marketplaces?

What are two-sided marketplaces? (they can also be called multi-vendor, or P2P, or peer-to-peer). Actually, it’s an intermediary platform for many vendors to sell goods to many buyers. In turn, payment solutions for online marketplaces aim to address multi-party transactions.

There are some specific challenges for them. They include:

  • Fraud protection;
  • Handling multiple payments;
  • Dividing funds between your merchants.

So, you need to verify which providers cope with all this well.

No less important for you to know who will perform as a Merchant of Record (MoR) in transactions. That means either you or your merchants will assume financial and legal liabilities.

To help you make the right choice, let’s look closer at key traits of 4 top payment processors for two-sided marketplaces.

You may also like: 6 Best Monetization practices to Build a Successful Online Marketplace

The best payment gateways for two-sided marketplaces

PayPal Commerce Platform

Payment solution PayPal | Codica

PayPal is the oldest and most popular payment provider that started in 1998. For now, it has over 305 million users in 202+ countries. It means that you will get access to a great audience of shoppers.

Number of PayPal's total active user up to 1st quarter 2020 | Codica

PayPal has its own marketplace payment solution known as PayPal Commerce Platform. It offers special features for two-sided marketplace online payments. According to your needs, you can opt for Managed or Connected integration paths.

With the Managed path, you act as a Merchant of Record and control dividing funds among your sellers. With the Connected path, PayPal splits payments and enables your merchants to be MoRs. Yet, to use it, your merchants are bound to have PayPal Business accounts. So, compared to other payment solutions for online marketplaces, now it has a limited option to select partners only.

Other PayPal Commerce Platform’s main features include:

  • Support for 100+ currencies;
  • Multiple payment acceptance;
  • High-level security that is compliant with PCI DSS (+3D Secure 2.0);
  • Support for split and mass payments.

Marketplaces using PayPal Commerce Platform include such brands as Grailed, iFundWomen, Replin. Entering new markets, these companies aimed to have a secure and reliable marketplace payment gateway. Being famous and trusted worldwide, PayPal happened to be ideal for them.

Braintree Marketplace

Payment solution Braintree Marketplace | Codica

Braintree is a payment software provider for e-commerce platforms and mobile apps. It processes payments in 46 countries. Braintree Marketplace is a company’s original product being pretty competitive among other payment solutions for online marketplaces.

Braintree Marketplace supports split payments, which is a useful option if you want to build a two-sided marketplace. It divides your merchant payments and automatically sends a commission fee to a marketplace owner. It’s also good news that your sellers can perform as MoR in transactions.

Braintree Marketplace provides your platform with the following benefits:

  • Support for 130+ currencies;
  • Multiple payment acceptance;
  • Advanced SDK features (Drop-in and Custom-UI integration options);
  • High-level security compliant with PCI DSS (+ Braintree’s Fraud Management Tools).

Yet, it has crucial geographical limitations. A Master Merchant (marketplace owner) and all the vendors must be registered in the U.S. Unfortunately, it doesn’t support international platforms.

Some of the marketplaces using Braintree are Hotel Tonight, Poshmark, Trouva. Targeting mobile-first users, they sought safety and great customer experience. With great SDK-features and advanced protection, the marketplace payment solution from Braintree could meet the payment needs of these companies.

Related reading: How Much Does it Cost to Build a Marketplace Website in 2020?

Stripe Connect

Payment solution Stripe Connect | Codica

Stripe is a payment provider for individuals and different-sized businesses. For now, it supports online payments in 39 countries. Stripe Connect is its special payment processor for two-sided marketplaces and crowdfunding platforms.

Compared to other payment solutions for online marketplaces, Stripe Connect has the simplest merchant onboarding. Your sellers just need to connect their accounts to your marketplace to start. It also provides split payments and allows you to set a service fee for each sale. Beyond that, your vendors can act as MoR.

Stripe Connect comes with a wide range of benefits:

  • Support for 135+ currencies;
  • Multiple payment acceptance;
  • High-level security compliant with PCI DSS (+ Stripe’s original tool, Radar);
  • Developer-friendly documentation and clean API’s;
  • Dashboard for management to control your business.

Although Stripe is expanding, now it’s focused on the Western world. It handles payments mostly in the USA, Australia, and Western Europe. You can check if it’s already available in your region on Stripe official website.

Marketplaces using Stripe Connect include Lyft, Kickstarter, Booking.com. Expanding internationally, these businesses faced difficulties with local regulations. Stripe Connect was just the solution which handled that well.


Payment solution Dwolla | Codica

Dwolla is a payment processor for e-commerce sites and mobile platforms. It offers advanced ACH-payment solutions for American marketplaces.

Dwolla handles two-sided marketplace payments providing a facilitation fund flow between the participants. In other words, it combines pay-in (funds going from customers) and pay-out (funds going to vendors) flows to undertake a transaction. Acting as a money transmitter, marketplace owners get their service fee.

It’s worth noting that with Dwolla, a marketplace owner needs to be a MoR and assume all the related responsibility.

Dwolla provides payments with such crucial features:

  • Support for ACH transfers in the US dollars;
  • Automated mass payments;
  • Developer-friendly documentation and clean API’s;
  • High-level security compliant with PCI DSS.

Among other payment solutions for online marketplaces, Dwolla has the tightest location focus on the US market. To use it, all 3 parties must be registered in the United States.

Some of the marketplaces using Dwolla are GOAT, Nomad Health, Tophatter. Scaling up, these platforms needed to simplify and speed up their marketplace payouts. Dwolla helped them to address this challenge through ACH-optimized APIs.

You may also like: Top 10 E-commerce Marketplace Development Trends 2019-2020

Paypal vs Stripe vs Braintree vs Dwolla

How to choose the right payment solutions for online marketplaces?

  1. Verify if it supports payments in your region. At this point, PayPal and Stripe are more flexible, having a global covering for partners. In turn, Braintree and Dwolla are suitable for US marketplaces.
  2. Check international marketplaces’ support (if it’s necessary for you). Stripe and PayPal fit if your sellers and buyers live in different countries.
  3. Opt for your appropriate MoR-strategy. In this view, with Dwolla, you as a marketplace owner will be a Merchant of Record. Braintree and Stripe allow your sellers to be legally responsible for transactions. Finally, PayPal offers you both options to integrate.

We have prepared a detailed comparison table with the main features of the above-discussed marketplace payment solutions: PayPal, Braintree, Stripe, and Dwolla, which can help you choose the best payment processing gateways when you are preparing for the launch of a two-sided marketplace platform.

PayPal vs Stripe vs Braintree vs Dwolla: Detailed Comparison
PayPal Commerce PlatformBraintree MarketplaceStripe ConnectDwolla
A marketplace owner and merchants’ locationGloballyUSGloballyUS
Support for split payments/sellers can act as MoRYesYesYesNo
Payment methodsPaypal, PayPal Credit, VenmoPaypal, PayPal Credit, Venmo, Google Pay, Apple Pay, Samsung PayGoogle Pay, Apple Pay, Alipay, Amex Express Checkout, Visa Checkout and othersACH payments
Payment cardsVisa, Mastercard, American Express, DiscoverVisa, Mastercard, Discover, JCB, American Express, Union PayVisa, Mastercard, Discover, JCB, American Express, Maestro, Union Pay, Carte Bancaire, Diners clubLinked bank accounts
Security toolsPCI DSS compliance, 3D Secure 2.0PCI DSS compliance, 3D SecurePCI DSS compliance, Dynamic 3D Secure, Stripe RadarPCI DSS compliance

Bottom line

PayPal, Braintree, Stripe, and Dwolla have the greatest online marketplace payment solutions. They offer seamless security and advanced options for online payment processing on a two-sided marketplace.

If you have a US-oriented platform, Braintree and Dwolla could be great for you. Stripe and PayPal are marketplace payment gateways best suited for international online trading.

The choice of payment solutions for online marketplaces is crucial, but not the only factor you need to consider to start an online service marketplace website. One of the most important factors is having a reliable and experienced development partner.

If you need any help with online marketplace development, Codica is ready to transform your ideas into reality. Contact us to discuss them right now!

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