WePay Developer

Platform Payments 101

Your service connects buyers and sellers, and you want to learn more about payments. WePay's Platform Payments 101 is written to help you discover the realities of facilitating payments on your platform.

Over the past few decades, the internet has impacted virtually every aspect of modern life. Traditional forms of communication have been disrupted by email, instant messaging, social networking sites, social news aggregators, forums, blogs, and more. The internet has not only changed the venue of human interaction; it has changed the very nature of it.

There is perhaps no better example of the internet’s transformative power than the evolution of commerce over the past twenty years. Juggernauts like Amazon, now the world's largest retailer, have galvanized commerce in ways that were simply unimaginable a decade ago.

Amazon is a prime example that the most exciting internet companies are not simply moving retail online, but are developing platforms that fuel commerce by removing barriers to the buyer/seller relationship.

Online platforms fuel commerce by connecting buyers and sellers, [...] facilitating payments
between them.

Upstarts, propelled by the rapidly decreasing cost of developing and deploying software and the ever-increasing popularity of the internet (particularly on mobile), are building new platforms that seek to remove friction from commerce. Historically, these companies have focused on education and discovery: helping merchants find customers (build a website, online marketplaces, online advertising) and helping customers make informed decisions (recommendations, reviews, ratings.).

Airbnb, for instance, helps individuals rent unoccupied living spaces. It connects hosts with guests and empowers both sides to make informed purchase decisions. It also facilitates payment between them. With over 10 million nights booked, across 250,000 listings around the world, the model seems to be working.

Kickstarter has a similar model, but instead of connecting hosts with guests, it connects donors with creative projects. Since its launch in 2009, Kickstarter has helped organizers raise over $250 million for various projects. Founder Yancey Strickler said that Kickstarter will distribute more money to creative projects in 2012 than the National Endowment of the Arts.

Airbnb and Kickstarter represent a new and increasingly popular type of online platform. The category also includes the hugely popular mobile app, Uber, which connects passengers with vehicles for hire; and TaskRabbit, which connects service providers with customers.

Facilitating payments is highly regulated, logistically complex, and financially risky. In a word, it's difficult.

This category is defined by niche online platforms that fuel commerce by connecting buyers and sellers, helping them to make informed purchase-decisions, and facilitating payments between them.

As these platforms grow in popularity, their users increasingly expect them to see the buyer/seller relationship through to completion. And this means facilitating actual payments.

Despite this development, however, facilitating payments is highly regulated, logistically complex, and financially risky. In a word, it’s difficult. This study explores the challenges associated with facilitating payments and aims to give you a stronger base of knowledge with which to make decisions about your own application.

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