Some time ago, we wrote an article about Custom Accounts from Stripe Connect. Today, we are going further to understand how Custom Account work. We will analyze some real business models where Stripe could be a great ally.
The goal of this article is to introduce some of the possibilities that Stripe offers to build a marketplace. When you think about some of the biggest companies in the world at the moment, they are typical marketplaces that connect a service provider with a customer who is willing to pay for that service. So let's start!
For some businesses, controlling the user experience is extremely important. Let's think of Uber, the peer-to-peer ridesharing company. Even though the driver provides the service to the customer, who controls the complete experience is Uber. The customer doesn't need to talk to the driver not even once if she/he doesn't feel like it (but please, don't do it! Let's all be polite). Finding the vehicle, setting the amount to pay, collecting and processing the payment, and asking to leave a review, everything is controlled by the app. They want to be sure that they are offering a good quality service.
Although the user experience is a combination of different pieces, collecting and processing payments are one of the hardest. Uber has to support typical credit cards, guarantee that the cards are valid and have enough funds. Then, it has to charge the customer a specific amount that will depend on the ride and, last but not least, it has to send the money to the drivers after they provide the service.
With Custom Accounts from Stripe Connect, solving all those is really simple. It provides a built-in solution to securely collect credit card information, that supports and validates the major credit cards around the world. The customer can also save multiple credit cards to use them later. Then, Stripe offers solutions to fully customize and schedule transfers to different accounts.
Stripe allows you, as the owner of the platform, to define where, when and how the money will move across all the participants of the transaction.
Back to the example, once the customer is charged -when the ride is confirmed-, money will be sent to the driver. In this case, the drivers' bank account would be the where, after finishing the ride would be the when and a bank deposit would be the how. Pretty awesome, right?
But of course, not every marketplace is the same. Some other big companies prefer that the service providers control part of the experience. Think of Airbnb, the short-term rental company. Airbnb doesn't set the rates but the service provider does. The app only charges a fee for connecting the host with the guest while they are in charge of deciding the transaction details. So, if a person rents her/his house, she/he decides how much to charge while Airbnb only charges a fixed percentage for using their platform.
Again, with Custom Accounts, this is not difficult either. The owner of the marketplace can collect and process payments, and transfer money to hosts while taking a fee for the service.
Furthermore, Stripe allows to control when to transfer the money to the host, so it's only transferred once the booking ends and the guest leaves the place.
And of course, if the booking is canceled, a total or partial refund can be processed so everyone is happy.
But of course, these are just a couple of alternatives. Money could also be directly sent to the providers' accounts and the marketplace owner invoices the provider at the end of the month -again, all automatically-. Or the money could be sent to the providers' accounts and retain it until the service is provided. Another option would be to schedule payouts based on some conditions: only after the customer leaves a positive review, two days after the check-out date, every end of month, etc. As you can imagine, possibilities are endless and will depend on the business model.
However, great power comes with great responsibility. Using Custom Accounts requires to consider a few things. The main ones are:
- The main account (aka platform account) is responsible for all the fees, disputes and fraud cases that may arise. This will vary based on the business logic but, for example, if money is directly sent to the service provider, she/he spends it and a refund needs to be done, the money will be taken from the platform account.
- The service provider doesn't know about Stripe's existence. This requires the marketplace to build the whole user experience, including screens to collect user and credit card information, options to see payment history, create refunds, check account balance, and more. I.e. you will have to build a GUI to get data from both, service providers and customers. If you've ever used Uber and Airbnb, you may have noticed that they have modules for drivers and hosts.
These are just some of the issues to consider to choose the right approach. Luckily, Stripe helps to make the right choice without needing to worry about collecting, processing and distributing payments.
Can you think of any other example where Custom Accounts from Stripe can help? Are you interested in building your own marketplace or directly processing payments from customers? Feel free to leave a comment below or contact us on our website: unagi.com.ar. We have a bunch of experience building applications that integrate with Stripe and would love to help you enhance your business or idea.
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