Stripe Connect Charge Types – Which Is Right for Your Business Marketplace?

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Stripe Connect is an easy way of setting up an online marketplace or platform, carrying out the charges, and sending payouts. There are different kinds of Count Accounts. The biggest challenge is to determine which technology to integrate because choosing the wrong Stripe Connect account will lead you to a dead end. It means lost time to resolve and extra cost.

The common error people make in choosing Connect Account is not considering the way charges are controlled when buyers pay. Steadfast Collective is an experienced Stripe developer and can help you in integrating payment infrastructure that is correctly funneled between buyers and sellers.

Stripe Connect Charge Types

There are different charge types and choosing one will depend on your business model and buyer’s funnel.

1.  Direct Charges

In this type, transactions are handled between sellers and buyers without a marketplace intermediary. It works great with Standard accounts. It means the seller will create a personal Stripe account so the onboarding burden from your platform is removed.

The seller onboarding process is automated and you can customize it to align with your brand. Direct charges even make sellers responsible for Stripe fees, chargebacks, and refunds. The Marketplace owners can charge sellers listing or ad fees separately and collect revenue.

Marketplaces can deduct a fee from the transaction amount automatically. You cannot shift from Connect Standard to Express for different charge type access. It is because the seller’s data will need to be recreated into the new account type. Therefore, map your payment flow needs first!

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2.  Destination Charges

Custom or Express Accounts use destination charges. The marketplace can take payments and deduct the commission then transfer the balance to the service provider or single seller. Destination charges even make sellers responsible for Stripe fees, chargebacks, and refunds.

In the Stripe Connect landscape, ‘transfer’ means moving funds to another Stripe account. When the marketplace moves the funds from the seller’s Connect account to their bank account payout occurs.

3.  Separate Charges & Transfers

These work best with Custom or Express Accounts. Just like destination charges, payments from buyers are taken and transferred to the seller’s account. The key benefit is that this charge type allows the marketplace to split the payments and transfer to several sellers – for example in delivery apps or Amazon marketplace.

Separate charges & transfers are currently available for marketplaces having accounts in Canada, Australia, Japan, the United States, Malaysia, Singapore, and New Zealand. Besides, the seller accounts and marketplace have to be in the same region.

The separate charges & transfer option makes sellers responsible for Stripe fees, chargebacks, and refunds.

Some use cases

  • Some marketplaces don’t desire to deal with the administrative duties of seller onboarding or refunds. They can choose direct charges with the Standard Account – for example, auction sites.
  • In case, the sellers and marketplace are based within the EU then separate charges & transfers with an Express Account can be used.
  • The US-based marketplaces can transfer to limited countries using destination charges paired with Express Accounts.
  • If the marketplace does not fall in the above scenarios, then use separate charges & transfers by creating marketplace Stripe accounts in the seller’s country or use direct charges coupling with Standard Account.

Ensure to partner with reliable Stripe Connect development professionals!