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MenuWe are planning to start an freelance service platform having global sellers. Can anyone suggest how to setup the payment flow structure?
We require to understand the pay in and pay out process for a freelance service marketplace. we have read that the funds must not be transferred to our marketplace bank account and if we do so it requires a money transmitter licence. We need help to understand if this is true and the options we might have to pay our global freelancers.
Answers
There are a many ways to setup payment in online marketplace. Here are a few examples:
1. Use a credit card processing service - This is the most common way to handle payments, and it's easy to set up. You just need to sign up with a reputable company and enter your billing and shipping information.
2. Set up a gateway account - A gateway account is a type of payment account that allows you to take credit or debit card payments online. This is a good option if you want to accept payments from a large number of customers simultaneously.
3. Use PayPal - PayPal is one of the most popular payment methods online, and it's easy to set up. Just sign up for an account, add your business information, and start accepting payments.
Whatever payment method you choose, make sure to keep your billing and shipping information accurate so that customers have an easy time paying for your services. And last but not least, remember to keep your business running smoothly by keeping an eye on expenses and making necessary adjustments as needed!
You could opt for an escrow service wherein the money can stay for the duration the project is being completed by the freelancer and post completion gets transferred to the freelancer from the client
OR
You can block a certain amount from the client's wallet for the duration they are engaging a freelancer
Legislation varies across different countries. When you hold other people's money you become a custodian, in the early days of a startup you can do it without a license, but at some point you would probably have to become compliant. That's why for early stage startups I recommend using payment gateway providers like:
- PayPal Commerce Platform for platforms and marketplaces: https://www.paypal.com/en/business/platforms-and-marketplaces
- Stripe for marketplaces: https://stripe.com/en-es/use-cases/marketplaces
- MANGOPAY (only in Europe): https://www.mangopay.com/pricing/
All these providers count with licenses and compliance teams to ease you the task of having to deal with it on your own.
I'll be happy to share with you some examples of what I've done with my startups and with the companies I consult.
Related Questions
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When creating a marketplace, does it make more sense to focus on stimulating demand first or supply?
Focus on the more difficult side of the marketplace. For instance, if you think it'll be easier to get suppliers, then focus first on getting buyers - always be working on your toughest problem (aka your biggest risk). You'll find some great blogging on Marketplace and Platform topics here http://platformed.info (read the ebook too!)CM
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How to attract users to both sides of a double-sided marketplace (legal Q & A)?
You could try a "widget" on the lawyer's site which facilitates getting generic questions answered for free. The idea being that in each practice area, there might be a handful of questions that they get asked frequently, and would commit to answering one-time. It could be used to qualify the web visitor (always a good thing) while satisfying the visitor by providing them an answer. Of course, the challenge here is that most lawyers might only be comfortable providing such watered-down generic advice, that the answers themselves wouldn't be very useful. But this way, you could provide value to lawyers somewhat comfortable with online discourse, while building up content. With enough lawyers and content, you could then expand the service to build towards your larger vision. But as John has mentioned, many entrepreneurs have and are actively trying to win with this type of idea and have often struggled. CaseText is a recent YC grad that is doing some interesting work in this area. Happy to talk through your product implementation.TW
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What is the best pricing (business model) to apply to a marketplace?
I like to separate your question into 2 sub-questions: #1 How do we determine which side to charge? #2 How much is the right amount to charge? On #1, my answer is that you can charge the side(s) for whom you add the most value. In your examples, Uber really solves a big problem for drivers, it's that they sit idle for a good part of the day, so are willing to pay a lot for new leads. (their alternative is no work) Consumers are charged more for the convenience of a private car but they are probably not so much willing to pay more for a taxi, even if they can hail one from their phones. For AirBnB, it's a mix, it's a way for landlords to monetize idle capacity which they are willing to pay for, but it's also a way for a renter to pay less than they would normally pay for a hotel. On #2 (how much), I like to triangulate a number of factors: - What's the maximum amount I can charge one side, while still being a good deal for them. - How much do I need to charge so that I can become profitable? (the economics are quite different if you charge 3% vs. 12%) - What are comparable services charging for substitutes/competitive offerings? I will just add that there is no formulaic way to determine pricing strategies (curated vs. open), and it's a lot more about what's the comparable and what the value delivered is. That's how I approached the question while deciding the business model at ProBueno.com (my startup)MR
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What is the most effective method to building a two-sided marketplace?
For four years, I was the marketing manager at Axial, a two sided marketplace that matches investors with companies looking to sell their businesses. We figured out the chicken and egg problem, then figured out how to market and sell each side in a way that scaled. When you think about building a two-sided marketplace it seems daunting, as your question reflects. It feels like you need to get everyone active all at once in order to create any value for anyone. But the truth is that you really only need to get one side engaged. The way I think about two-sided marketplaces is like a grocery store. A grocery store is one of the original two sided marketplaces: there’s a customer who needs fruit or milk or something else and there is a farmer who needs to sell fruit or milk. The grocery is the conduit between them, the two sided marketplace. If the farmer (or other vendor) can’t consistently sell their goods at the store, they’ll sell somewhere else. If the shopper doesn’t find the fruit or bread or other products they’re looking for on a regular basis, they’ll go somewhere else. The value of thinking about a two-sided marketplace like a grocery store is that it’s obvious who needs the product now and who is willing to wait awhile. The shopper has a very time limited window to buy the product - they’re going to be in the store for a half hour then they leave. If the product isn’t on the shelf, they’re not waiting for it. If the fruit is bad, they’re not buying it. The product on the shelf, on the other hand, can wait around. But each product does have a shelf life - some products, like canned foods, might last years while others, like fresh fruit or bread, might last only a couple of days. So, while the times need to match up, each side has different time requirements. In hacking a two-sided marketplace it helps tremendously to figure out which side of your market is the shopper and which side is the product. It’s not always obvious though. Sometimes what is being “bought” on your marketplace is actually the shopper. In the case of Axial, we were helping investors buy companies. It seems like the shopper is the investor. But it’s not - they’re actually the ones willing to wait around for the right company to come to them. The company being sold actually has a very short time frame to find the right buyer - usually a two week window in a well run sale process. On our marketplace, the two underlying assets were investor profiles and company profiles (to simplify everything). The investor profiles actually became our product on the shelf while the companies became the shoppers - even though it was the investors buying the companies. The investors were more willing to wait for the right company rather than the other way around. That insight helped us understand how to hack the marketplace to success. The side that is willing to wait around longer is almost always the easier side to collect. If you’re starting a grocery store, it’s always better to go talk to all the vendors and fill your store with product before you open it to shoppers. Leading shoppers through an empty store doesn’t meet their immediate need of needing to make dinner tonight. Talking to a farmer about the neighborhood customers you’ll have as soon as you open is a lot easier. And the farmer is more willing to have low sales at first in order to secure his spot on your shelves so his competitors don’t get the prime space he’s going to want later. If you think about Uber, which is clearly creating a two-sided marketplace of drivers and riders, they operate exactly the same way. In Uber’s case, the driver is the product on the shelf. The rider is the shopper. The drivers are willing to drive around for hours looking for rides. A rider will open the app, see if they can get a ride quickly, and if not will go to an alternative like Lyft, a taxi or the train/subway. That’s why Uber is spending so much money to acquire new drivers. They’ll pay drivers thousands to join, even buying them cars in some cases. They’ll sign limo drivers up as Uber Black drivers, convincing them that they’ll make as much or more than they are in the limo business. Then, when there is only UberX riders around and not enough drivers, Uber will eat the cost of paying an Uber Black driver to drive an UberX ride. Uber realizes that riders (shoppers) only use Uber (visit the store) if they’re confident good rides available when they want them (products they want are in stock and fresh). So Uber is hacking the product and letting it sit on the shelf (drivers driving around looking for rides) because that’s the only way to make sure they don’t lose to taxis or Lyft. I hope that gives you a framework to use as you think about growing or starting your two-sided marketplace. If you’d like to chat with me as you think through your marketplace, I’m available as an expert here on Clarity. I’m happy to make specific suggestions for how you can structure and grow your business. Good luck.CB
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Broad niche or Targeted niche which way to go?
I always suggest going "uncomfortably narrow" initially so that you can really dial in the user experience and build liquidity first. Going broad will be tougher as there's too much noise to signal. Also, it's best to fake the supply side initially of you can to improve the buyers side first, then figure out supply & quality afterwards if customers are buying and you've proven out a demand strategy that will work.DM
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