Adyen for Platforms — Part 1 of 4

Managing money flows with control and compliance

In this guide, you’ll learn:

The benefits of bringing payments in house

How to define your funding flows

Tips for keeping up with regulations

What to look for in a payments provider

Platforms are getting more advanced, and so are payments

Much has changed since the earliest days of marketplaces, when companies like Amazon and eBay made it normal to shop online. Decades later and marketplaces aren’t the only platform business setup challenging the status quo. 

Software as a Service (Saas) and on-demand platforms are unlocking consumer demand in surprising ways, with experts predicting that digital ecosystems could account for more than 30% of global corporate revenue by 2025.

Some of these platforms are surfacing new modes of working altogether (like those being built for the passion, sharing, and gig economies), while others are transforming traditional industries (such as insurtech, legaltech, and business as a service). And while no two are alike, all share similar challenges when it comes to their payments: Complexity, control, and global scale.

All too often, inflexible payment systems can be a blocker to growth. If your platform business is experiencing some of the following, then our four-part series on platform payments is for you. 

7 signs it's time to upgrade your platform's payment setup

It takes a long time to add new payment innovations (such as digital wallets) or to go live in new markets.

You aren’t getting economies of scale when it comes to payment processing costs or enhancements (like adding POS) come with expensive project costs.

It's difficult and time consuming to do simple tasks like customer returns or seeing why a transaction was declined due to risk.

You see higher cart abandonment at the payments screen in certain geographics or demographics due to non-native checkouts or payment methods mix.

You use multiple systems for risk management, reporting, and user onboarding which require a lot of maintenance time.

You have complex contracts and vendor setups across different regions to manage.

You can't respond to users’ requests, like the ability to do sales in-store on POS devices or buy online and return in store (BOPIS).

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The benefits of bringing payments in house

Like any real-life marketplace, platforms are ultimately spaces for commerce. Goods and services are traded between users (sellers, service providers, couriers, drivers, hosts) and customers (buyers, shoppers, riders, guests) through your platform. Money flows across all parties, which is why funding speed and accuracy are key markers of platform health.

Take Zenoti. The SaaS platform helps spa, medspa, and salon owners with every aspect of their business, including elevating the guest experience with touchless booking, checkin, and payments experiences.

With 12,000+ spa customers in 50 countries, having the ability to get sales funds to each store in a timely fashion is one way Zenoti continues to attract more spas onto their platform. Since they have the flexibility to design a range of different funding flows (such as redeeming gift cards purchased at store A and redeemed at store B), they have better control over their customer experience. The right payment setup is at the heart of these flows.

Here’s how to get your flows just right for your platform business in two steps.

Define your funding flows

Money constantly moves through your platform. Optimizing these actions can mean huge efficiencies for everyone involved. The result? Happier users on your platform business — and happier customers, too.

For example, say you're a marketplace for sneakerheads. You want to empower your users with easy-to-run promotions during major holidays. But because your payments are outsourced, it can take days to reconcile a payment with a promotion code for your sellers — which usually means massive delays in fulfillment. That’s not a great experience, even for the most patient fan.

To deliver the seamless experiences that keep customers coming back (thereby creating that stickiness for your users), you need to get clear on what you want for your business across two categories: Fund allocations and fund transfers.

Fund allocations
How you want to calculate and deduct funds along the flow (e.g. for fees or commissions).

Fund transfers
How you want to shift balances within your platform (e.g. for credits, refunds, and promotions).

Splitting funds with allocations

When a portion of a sale you process for your users is split across two or more parties, it usually involves three actions: Calculating the split, either as a set amount or a percentage of the sales price; applying the payouts to multiple platform accounts in real time; and reporting and tracking of that funding event.

Calculating the split

Applying the payouts

Reporting and tracking

By using APIs, you can customize your fund allocations to conduct splits automatically. This lets you create allocations like:

Taking a success commission 

A customer purchases a $50 pair of sneakers. A $5 commission (10%) goes to your platform, $45 to the user. All funds are routed to the user's and your platform’s bank accounts.

Taking a service fee and commission

A customer orders a delivery of $50 in donuts. A $5 fee goes to your platform paid to your bank account, a $5 fee goes to the driver, and $40 goes to the donut shop paid to their bank account.

Taking a donation

A customer spends $50 and either adds an additional donation at checkout or a portion of the sale price is taken as a donation for the nonprofit supported by your platform. Funds are paid directly to the charity’s and user's accounts.

Moving money with fund transfers

Keeping users on your platform has many benefits, which is why fund transfers are popular. The money being moved can either be from your platform to your users, or between users who can then use funds as a customer on your platform. 

Originally, fund transfers were designed to move monthly fees from users’ accounts to the platform account. Today, there are many additional creative applications:

A promotional credit given to a user to spend on the platform

Common with sign-ups, the amount is deducted from a platform admin account and credited to the user’s platform account to help create a little incentivization. 

A refund needs to be applied by the platform admin

Funds from the user's account are deducted and credited to the customer's account. Note: Some platforms maintain a minimum account balance to avoid negative balances from refunds.

Two platform users have completed a sale with each other

The sale balance is transferred from the user to the purchasing party as a credit in their platform account. This is a great way to keep users coming back to your platform as a seller and buyer.

A monthly fee is charged to users

This is calculated, deducted from users’ accounts, and transferred to a platform admin account on a regular cadence (e.g. monthly). Tip: You can automate fund transfers like this with Adyen.

Craft your desired payments experience end-to-end with Adyen for Platforms and our enterprise-grade APIs.

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Funding flows checklist

Working with the right payments provider makes it easier to choose funding flows for your platform, but you still need to know your business’s needs. Once you have your funding flows in mind, it’s time to put them in action. 
The following checklist can help.

Determine what you’d like to automate and in what frequencies, adjusted for the regions and time zones you’re doing business in.
Set up an experiment framework for campaigns and discounts to see what gets users back.
Contextualize your platform business. For example, many brands took on donation collections to support global causes in 2020 and it’s now becoming standard practice.
Get your pricing right with a flexible system that tests pricing sensitivities as well as new pricing structures at pace.

Keep up with regulations

Back when transactions happened mostly in person, knowing who you were doing business with and minimizing fraud was easy enough. All you needed was an ultraviolet light beside the cash register for checking large bills.

Today, an ever-evolving payments landscape makes risk a constant threat. In response, the level of payment regulation has risen dramatically over the last two decades and is connected to many aspects to help protect consumers and businesses. These include online security, tax decisions made in different regions, and even the ability to stop inadvertent funding of terrisom.

Meeting regulations can help your platform safeguard against risk and liability. No matter the approach you take – whether you keep funds in your platform or exit them via payout – these transactions always have higher regulation. It’s also important to note that holding funds can push you into a financial services space from a regulation standpoint, which most platforms don’t want to make core to their business.

“eBay’s global marketplace operates in over 190 markets. Adyen brings to the partnership a broad global footprint with a flexible and scalable technology platform.”

Alyssa Cutright ・ VP of Global Payments, eBay

Examples of mandatory regulations:

Sanction lists

These lists of individuals are issued by governments worldwide in an effort to fight financial crime and illegal activity. Constantly changing, their purpose is to restrict or prohibit trade from known targets. Your platform can’t allow sales or payouts to targets on this list and can be fined/prosecuted if you do.

Anti-money laundering (AML)

Money laundering is the illegal process of concealing the origins of money obtained illegally by passing it through a complex sequence of banking transfers or commercial transactions. The overall scheme of this process returns the "clean" money to the launderer in an obscure and indirect way.

Know your customer (KYC)

KYC is the process of identifying and verifying the identity of your customers. It’s required by payment industry regulations as a prerequisite to allow individuals or businesses being paid out.

Payment Service Directive 2: Strong Customer Authentication (PSD2)

Mandatory for European transactions, this regulation ensures a higher level of security for customers when buying online. 

Stay ahead of new regulations and easily scale into new regions with Adyen for Platforms.

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Regulation capabilities checklist

The easiest way to manage regulations for your platform is to find the right payment service provider (PSP) who can do it for you, one who has the licenses and resources to automate this process. Like Adyen for Platforms, which connects these capabilities right into our solution.

Here’s what to look for when assessing a provider.

Do they offer acquiring, electronic transfer licenses, a banking license, and card issuing? Is 3DS2 built in to their solution? Are they PCI compliant? Do they have an affiliation with industry governing groups like EMVco?
Set up an experiment framework for campaigns and discounts to see what gets users back.
Built-in KYC database
Do they help you complete this step automatically when onboarding new users? How is their KYC database updated and maintained?
Built-in sanction lists
Are they listed by country and are they updated regularly?
Proven performance
Can they confirm expertise across key payment directives, like PSD2? How quick do they respond to implementing technology for new regulation?
What markets are they in and do they have local offices on the ground? This enables better connection with central regulators and government groups.

Making payments core to your platform business

A guide to owning the experience from end to end

Part 1

Managing money flows with control and compliance

Leading platforms and marketplaces like eBay, Wix, GoFundMe, and SeatGeek use Adyen to accept payments across channels at scale and stay competitive as they move into new markets and regions. To learn more about how our single global platform can help your business offer a best-in-class payment solution, check out Adyen for Platforms or reach out to our team.

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