Platform Payment Flows: Direct Charges

In our last episode, we covered that there are broadly three payment flows for platforms and marketplaces:

• Destination charges (last episode)
• Direct charges
• Separate charges and transfers

We’ll be getting into direct charges in this episode.

You might remember from the last episode how funds flow broadly in a destination charge (bringing back our fictitious website builder platform 'Websitely' and the also fictitious craft beer brewery 'Brewvolution'):

This is reversed with direct charges:

But why choose one over the other? The answer lies in the type of user that’s selling on the platform. Direct charges are recommended to platforms with users that are on standard accounts.

Standard accounts

These are essentially standalone Stripe accounts, which allow users to be on multiple platforms that use Stripe. This setup is more common for larger merchants that sell on multiple platforms or also marketplaces (the other account types are Express and Custom, both embedded only within that platform/marketplace’s ecosystem). This is pretty powerful and it allows these connected accounts to view all their payments in one view using Stripe. Website and store builders are good examples for platforms that might use this setup, so here’s what that could look like for Websitely:

It’s not just about versatility though, as platforms may also choose standard accounts because the burden of managing the connected accounts wouldn’t fall on them. It allows them to get started quickly, without having to manage the onboarding experience and deal with the connected accounts when issues arise. Instead this is all managed by Stripe. Standard accounts bear all the risk and liability of the payment. They are essentially the Merchant of Record, with their own merchant accounts in Stripe. This is a crucial detail.

It's important to note here that just like destination charges, direct charges are also suitable for certain marketplaces, but only those that have but 1 connected account involved in any given payment. In other words, multi-seller baskets are not possible with this setup and we will get to them in our episode on separate charges and transfers.

So far so good. It’s exactly these types of accounts, the Standard ones, that we should be using direct charges with.

Flow of funds

As touched on above, the funds move first to the connected account and then to the platform account. To take our craft beer brewery Brewvolution as an example, it would look like this:

What’s really special about this setup is that due to the direct relationship that Brewvolution has with Stripe, they are also being charged the payment processing fees. This setup makes sense for platforms that want to take a more hands-off approach towards payments.

Though this is the common flow of funds for platforms using direct charges, we have also seen platforms that are on IC++ use direct charges:

If you’ve been following our Control Room series closely and remember our episode on destination charges , you might think this is more or less what a destination charge with the ‘on_behalf_of’ parameter accomplishes. And we would salute you for your attention to detail. The reason why a platform might choose this setup is because Standard Accounts allow the platform to leave not just liability but also onboarding and account management to be a thing between Stripe and the connected account. On top of that, as we’ve mentioned before, it’s great for those merchants that are on multiple platforms, as they can just link their existing Stripe account to your platform. Those are the key differences.

Make Revenew your Control Room

Stripe Connect is an incredibly versatile engine for platforms and marketplaces processing payments. You can see nuances catered for that make sure that buyers and sellers can transact as freely and safely as possible.

Flexibility means things aren’t just black and white. What happens when you have a hybrid setup, with Standard Accounts (for the heavy users, large merchants) and Express Accounts (for smaller ones) being used in the same ecosystem? How do you know how much you should charge your users for a payment upfront when you’re being charged IC++ fees?

These are the sorts of questions only Revenew has the answers to. So, reach out if you want to get a tour or check out our other articles and testimonials, to get an idea of the value we can provide to you as a platform or marketplace.