Risks of accepting payment through a marketplace for merchants

Using marketplaces like Amazon, Talabat and Zbooni to accept payments can be a convenient option for merchants as it allows them to take advantage of the marketplaces’ existing customer base, payment infrastructure, and fraud detection and prevention systems. This can help reduce the headache in many cases of setting up a merchants own website and payment infrastructure, as the marketplace would take some of the financial risk and also the product setup itself.

Additionally, marketplaces typically offer a variety of payment options for customers, such as credit and debit cards, e-wallets, and bank transfers, which can increase the chances of a successful transaction. Marketplaces also offer merchant services such as shipping and handling, customer service and returns, which can help merchants save time and money.

However, as much as they are convenient for the merchants, they are not setup to process payments alone or to be used as a payment provider. Marketplaces are a complete ecosystem for merchants to start selling their items and have large exposure to clients, and more and more merchants are utilizing them as a source of online payment, which carries some risks and cautions for merchants.

Below are some of their shortcomings and things to watch out for when processing payments on marketplaces:

Fee structure:

Accepting payment on marketplaces is usually much more expensive than directly through a payment gateway, ranging from as high as 30% for platforms such as Talabat, to 3.5% on e-commerce apps such as Zbooni. These are usually much more expensive than direct payment, especially for services such as payment links and single item sales where the merchant is in touch with their own clients and not relying on the clients of the marketplace.

Customer experience:

merchants may have less control over the customer experience and may be subject to the marketplace’s policies and procedures, which may not align with the merchant’s own business model. This includes the actual look and feel of the merchant’s page on the marketplace (not easy to customize) and strict policies levied on customers such as refund and return policies that merchants might be forced to accept.

Security and regulation:

while many marketplaces might be PCI compliant, many others are not and have no need to be regulated by any regulatory body yet still accept payment. Any breach of the marketplace security could result in database leaks for the customer base or sales, or could simply hurt the merchant’s credibility of selling online. Merchants must be very careful in choosing the marketplace, and check that the right security is in place. Payment gateways on the other hand are regulated and PCI compliant, so merchant and customer data is always protected and guaranteed.

Chargebacks:

Most marketplaces use third party gateways to process payments, which means they are the merchant on record in case of a payment on their platform (i.e marketplace name can be seen on the card statement of the client instead of the merchant). This places an additional layer between the merchant and the client, and in case of any dispute and chargeback merchants are at the mercy of the dispute center of the marketplace if any is available, which might lead to merchants losing a dispute automatically or being charged hefty fees regardless of resolution result. Payment gateways on the other hand always have a resolution center working directly with the merchant to resolve any disputes or claims, which is always a safer partner in case of chargebacks.

Learn more about chargebacks here and The role of payment gateways in cases of chargeback for merchants

However, using a standalone payment gateway also means that the merchants are solely responsible for making sure their processes are in place to handle client support and disputes together with the payment partner. The protection against fraud and chargebacks, which can be a significant risk for merchants, especially for small businesses can be mitigated by having the right payment partner. Merchants would otherwise have to invest more in security and fraud detection measures, and they will be liable for any fraudulent transactions that occur.

In summary, using marketplaces can provide merchants with and easy and quick way to start selling online, however they should not be used as a main source for accepting payments. Using a regulated payment gateway provides merchants with more control over the customer experience, pricing, fraud security and reduced fees.

Paymennt.com is a regulated and PCI compliant payment gateway, with a dedicated dispute center to help merchants through any disputes and chargebacks. We also actively advise clients on how to prevent chargebacks and good online payment hygiene. Get in touch with paymennt.com today to learn more.