What is Stripe Connect? A Comprehensive Overview to Split Payments on Marketplaces

Stripe is a popular payment service that makes it easy for businesses to handle online payments. It started back in 2010 and offers handy APIs that let companies manage payment interactions, accept payments, and transfer money—all right on their platforms. They process hundreds of billions of dollars in transactions every year, which really helps businesses keep their payment and financial operations running smoothly.

In this article, we’ll dive into what Stripe Connect is and how you can make the most of your Stripe account, especially if you’re running a multivendor marketplace.

Table of Contents

• What Is Stripe Connect, and How Does It Work?
• Types of Connected Accounts
• How Stripe Connect Helps Marketplaces
• Benefits of Stripe Connect for Diverse Business Models
• Well-Known Marketplaces Using Stripe Connect
• What Countries Are Available for Stripe?
• Payment Methods Available in Stripe Connect
• Specialized Payment Scenarios in Stripe
• Separate Charges and Transfers
• Advanced Reporting, Compliance Tools, and Tax Forms
• KYC Compliance and Identity Verification Processes
• Understanding Integrations via Stripe Connect
• Resources and Support for New Users
• Setting Up Stripe Connect
• Streamlining Transactions for Multivendor Marketplaces
• Stripe Connect Integration Effort: Tips for Users

What Is Stripe Connect, and How Does It Work?

Managing a multivendor marketplace can be a real hassle when it comes to payments. You’ve got to figure out how to split the money, keep track of accounts, and ensure everyone gets their cash on time. Plus, there’s the added headache of handling accounting, tax compliance, and regulations in different countries. It’s a ton of manual work that can easily lead to mistakes and unhappy vendors.

Stripe Connect automatically handles payments and payouts, making life so much easier for platforms and marketplaces. Thanks to it, you can send money around the world without all the hassle of complicated tech or local banks.

It’s especially great for marketplaces that want to make things convenient for users—it helps with onboarding, identity verification, and even reporting, and facilitates efficient account management.

Types of Connected Accounts

There are three types of accounts you can use with Stripe Connect:

1. Standard Account: This is the basic option. It lets each seller in the marketplace manage their own Stripe account while using your platform for payments. So, if someone sells a craft, they handle their own payments, which keeps things simple for you.
2. Express Account: Imagine you’re running a ride-sharing app. With an Express Account, drivers—who are not professional merchants—can sign up quickly and easily. It balances control and user-friendliness, making the onboarding process a lot smoother.
3. Custom Account: If you want full control, this is the way to go. Let’s say you start a big eCommerce site. A Custom Account lets you fully tailor the user experience and payment process. Users wouldn’t even see the Stripe dashboard—everything is managed through your app. It’s ideal for fully customized platforms.

Each account type has different pricing. Standard accounts have no limits for startups, but Express and Custom accounts come with specific fees. For instance, there’s a $1 fee for keeping an active account, $2 for recurring billing, and another $2 for refunds. So, how refunds are handled can change based on the type of account you choose.

How Stripe Connect Helps Marketplaces

Stripe Connect helps tackle all the payment chaos that can happen when you have a bunch of users. Let’s say you’re running a marketplace where someone buys a handmade necklace. Stripe makes sure the money goes straight to the seller safely and checks their identity, so everything’s secure.

It also has some great features for managing accounts. For instance, Express accounts provide enhanced flexibility for sellers, including options for customizing profiles and payment methods, while Stripe manages the complexities of onboarding and identity verification. Think about it: when new sellers sign up, Stripe handles all routines like identity verification and keeping track of sales. This makes life way easier for everyone involved. For example, if you’re an artist selling prints, you don’t have to worry about payment processing.

You can even link your PayPal account if you want more flexibility. So, if someone wants to pay you through PayPal for that cool painting you sold, it’s no problem at all!

Benefits of Stripe Connect for Diverse Business Models

If you know the key things your business needs to focus on, Stripe Connect can help you handle payments better. Marketplace, subscription service, or something like an on-demand app, it helps simplify payments and makes things easier for your users. The cool part is, it’s flexible enough to fit whatever your business needs. So if you know the key things your business needs to focus on, Stripe Connect can help you handle payments better.

On-Demand Business Models: Speed and Adaptability

For businesses that rely on on-demand models, like ride-sharing or gig work, getting payouts quickly and handling fees smoothly is important for keeping workers happy and making sure services stay top-notch. Stripe Connect really shines here by offering customized solutions that keep things running fast.

When customers can pay right away, it keeps drivers or freelancers satisfied because they get their money faster. Plus, businesses can tweak charges easily for things like promotions or peak times, giving them the flexibility to adapt to whatever the market needs.

Subscription and Recurring Payments: Customization and Flexible Invoicing

Many online marketplaces rely on subscription billing. Although alternatives like MangoPay offer recurring payments functionalities, Stripe’s Billing feature—available through Stripe Connect—should be the primary option. It provides seamless integration, robust security, and extensive customization capabilities that cater specifically to the needs of diverse marketplace models.

Stripe enables users to quickly set up regular billing plans, allowing for flexible invoicing schedules—be it weekly, monthly, or annually. This capability not only supports subscription-based platforms but also facilitates the sale of products, enhancing revenue opportunities for businesses.

Crowdfunding and Fundraising Platforms: Trust and Transparency

When you’re handling a crowdfunding or fundraising project, trust is a big deal. Stripe Connect makes things easier by ensuring the money goes where it needs to, fast and without mistakes. It keeps things smooth and helps avoid any problems, so donors feel comfortable. If you’re setting up a campaign, it’s a tool worth using. And honestly, the better you understand how crowdfunding works, the easier it is to keep everything running smoothly.

Well-Known Marketplaces Using Stripe Connect

A bunch of well-known companies are already using Stripe Connect to manage their online marketplace operations.

For instance, Instacart uses it to manage payments for grocery deliveries. So when you order your groceries online, Stripe is working behind the scenes to make sure everything goes smoothly.

DoorDash does the same for food delivery—when you order that late-night pizza, Stripe is handling the payment.

GitHub Sponsors is another great example. It lets developers get support directly from their fans, and Stripe Connect makes the payment process seamless.

And if you’ve ever used TaskRabbit to hire someone to help with chores, they use Stripe to make payments easy between users and service providers.

Even Kickstarter, the crowdfunding platform, relies on Stripe Connect to process payments from backers.

And there’s this cool project called Bazar.Precious Plastic which is based on CS-Cart. It helps vendors get set up and ensures secure payments on the platform.

Ask what else CS-Cart can do

What Countries Are Available for Stripe?

Stripe is a solid solution for marketplaces. It’s easy to set up, and businesses can get their payment systems running fast. But here’s the thing—Stripe doesn’t work in each and every country, and depending on what you need, it might not be the cheapest option out there.

If you’re thinking about using Stripe Connect, just remember: where you and your sellers are located really matters. Stripe is available in 46 countries, including big markets like the US, Canada, Japan, and Singapore. But, compared to PayPal, which is in over 100 countries, Stripe feels a bit limited.

If you’re in places like India or China, support is pretty limited for now. So, it’s worth double-checking what’s available in your country before diving in. 

Payment Methods Available in Stripe Connect

Stripe is pretty flexible when it comes to payment methods. It’s not just about credit cards like MasterCard or Discover—you can even accept ACH payments, which is handy. But what makes it cool is how it handles local payment methods.

For example, if you’re in Belgium, you can use Bancontact, and in Germany or Austria, there’s SOFORT. It lets customers pay straight from their bank accounts, so they don’t have to mess around with credit card details. That usually means fewer dropped transactions and a smoother payment process overall. Nice touch for making things easier for everyone.

Specialized Payment Scenarios in Stripe Connect

With Stripe Connect, businesses can link up different accounts to their payment system, which is great for setting up payments that feel more personal. Companies can tweak how the whole payment process works depending on what their users need.

Source: Stripe Documentation

Separate Charges and Transfers in Stripe Connect

When you’re dealing with complex marketplace transactions, like when a customer buys multiple items from different sellers in one go, there can be extra fees and charges. It’s common in one-click shopping setups.

While Stripe Connect offers some really great features for businesses, you’ve got to keep an eye on the pricing and fees. You want to make sure everything fits with your business’s financial plan so you don’t end up with unexpected costs.

Advanced Reporting, Compliance Tools, and Tax Forms

Navigating tax regulations can be challenging, and mistakes can lead to severe penalties and reputational damage.

Stripe Connect incorporates integrated compliance measures for global markets, simplifying tax reporting and ensuring adherence to local laws. Additionally, Stripe Connect aids in compliance with sales tax laws by automatically calculating and collecting sales tax during transactions.

This functionality helps businesses maintain compliance and mitigate risks associated with tax errors. This is especially useful if you’re working in different countries, since it makes filing sales taxes a lot easier and helps you avoid any penalties from messing up compliance.

KYC Compliance and Identity Verification Processes

KYC (Know Your Customer) is a big deal when it comes to payment processing, especially with all the rules about preventing money laundering.

Stripe addresses this challenge—they collect and verify info from people who get paid through their platform. This whole identity check process helps make sure accounts are legit and meet the necessary regulations.

Stripe uses different methods to verify, so businesses can feel confident that their payment system is solid and above board. 

Understanding Integrations via Stripe Connect

The service is flexible enough for any business, big or small, and getting it up and running is usually pretty smooth if you’re using something common, like a ready-made eCommerce platform such as CS-Cart. But if you’re dealing with a custom setup or something off the beaten path, you might hit a few bumps.

They give you an SDK to help, but having someone who knows their way around code will make things easier. It’s especially handy for developers who want to build a payment system that really fits their users, not just a one-size-fits-all deal.

Resources and Support for New Users

For businesses navigating the complexities of transaction processing, Stripe serves as an invaluable resource. Its comprehensive documentation covers nearly every facet of the system, providing guidance for new users. 

Moreover, Stripe has an active community forum where members can ask questions and share insights. For users experiencing difficulties, Stripe offers a robust support system on its website. Those without technical expertise can also consider hiring integration developers or partnering with Stripe-certified professionals to ensure a smooth implementation.

Supported Programming Languages and Developer Resources

Stripe Connect works with pretty much any programming language you’d expect—Python, Ruby, Java, PHP, you name it. It’s designed so developers from all sorts of backgrounds can dive in. They’ve got all the stuff you’d need too—API docs, code samples, guides, everything to help you get up to speed.

At first, it might feel a bit technical, especially if you don’t have an IT department in your company. But honestly, with all the resources they give you, even if you’re not that techy, you can still make it work and mold it to fit your setup. The API’s flexible enough to let you shape the whole payment flow to do exactly what you want.

Setting Up Stripe Connect

Setting up Stripe Connect is straightforward enough. Once you’ve signed up, you log in and start the setup process. 

The system will ask you a few basic questions about your business and the type of transactions you’ll be handling.

Then, you’ll need to pick an account type—Standard, Express, or Custom—depending on what works best for your setup. But heads-up: once you choose one, you’re locked in, so it’s good to think it through before deciding.

Once you’ve got your Stripe account set up, you can add the Stripe Connect payment method to your CS-Cart marketplace. 

To enable Stripe or Stripe Connect in CS-Cart, go to Settings → Payment methods → Add payment method → choose Stripe in the Processor dropdown and set it up with your Stripe credentials.

Setting up Stripe Connect in CS-Cart

Streamlining Transactions for Multivendor Marketplaces

Running a multivendor marketplace can be a headache when it comes to handling payments. You’ve got to deal with splitting money, managing accounts, and making sure everyone gets paid on time. It’s a lot of manual work that can lead to mistakes and frustrated vendors.

CS-Cart has been a prominent player in the eCommerce platform market since 2005, offering robust solutions for businesses looking to establish and grow their online presence.

With the introduction of version 4.16.1, Stripe Connect add-on became available by default, providing users with a powerful tool to streamline payment processing and enhance their marketplace capabilities.

The Stripe Connect Payments integration add-on was designed specifically to automate payment distribution, improving the functionality of CS-Cart multivendor marketplaces. 

With this add-on, you can kick back and relax while it handles the heavy lifting. Vendors get paid on time without hassle. Plus, you can focus on growing your marketplace instead of drowning in financial details.

The add-on distinctive features include:

• Wide Payment Method Acceptance: Supports major credit cards, making it easier for customers to pay.

CS-Cart allows for configuring Google Pay and Apple Pay methods for the Stripe Connect users

• Multi-Currency Support: Allows payments in over 135 currencies with automatic conversion.

• Flexible Vendor Accounts: Vendors can choose between Standard or Express Stripe accounts based on their needs.
• Automatic Payment Splitting: Payments for purchases involving multiple vendors are split automatically, reducing manual work.
• Stripe Fees Management: Offers flexible fee structures to assist with financial planning.

Example of a customized store on CS-Cart, allowing for streamlined vendor onboarding by making Stripe Connect account creation a mandatory first step. The modification deactivates the “Add product” button until the account is set up, thus ensuring vendors are aware of the payment setup requirement before they can start selling.

By leveraging the Stripe Connect Payments, multivendor marketplaces can enhance their payment processing capabilities, improve vendor satisfaction, and provide a more seamless experience for customers. 

This automation not only saves time but also reduces the potential for errors, allowing marketplace owners to focus on growing their businesses rather than managing complex financial transactions.

TRY MULTI-VENDOR DEMO

Stripe Connect Integration Effort: Tips for Users

Stripe has in-built integrations with lots of well-known platforms. However, despite these integrations, many users still encounter challenges when configuring the split payments.

Here are tips for eCommerce business owners implementing Stripe Connect themselves:

• Always Authenticate Cards: Ensure users authenticate their cards to prevent fraud and disputes. Implement 3D Secure to enhance security, shifting liability for fraud back to the user and reducing potential costs and penalties.
• Prepare for Complex Custom Onboarding: While Stripe Connect offers customizable onboarding options, handling personal data and compliance across different regions can be challenging. Consider using Stripe Express to simplify the process, especially during the MVP stage.
• Process Payments Client-Side: Avoid server-side payment processing whenever possible. Payments should be initiated from the client side to ensure proper authorization and reduce issues related to unauthorized transactions.
• Prepare for Errors and Exceptions: Anticipate potential issues such as fraud checks or insufficient funds. Test your integration thoroughly and implement webhook listeners to keep users informed about their account status and any transaction issues.
• Pay Attention to Webhooks: Webhooks are crucial for syncing your server with Stripe events. Ensure your platform can handle these notifications effectively instead of relying on polling, which can be resource-intensive.
• Define Payment Methods Early: Clearly determine which payment methods you will use from the start. Understand the implications of different methods, like destination charges, to avoid complications such as negative balances on connected accounts.
• Choose the Right Charge Type:
  • Direct Charges: Use when customers transact directly with connected accounts (e.g., Shopify or CS-Cart).
  • Destination Charges: Ideal for transactions where customers pay the platform for services (e.g., Lyft).
  • Separate Charges and Transfers: Best for splitting payments among multiple users (e.g., DoorDash).
• Understand Stripe Fees: Direct charges offer flexibility in fee billing, while destination and separate charges typically use the platform’s pricing plan.
• Monitor Refund Processes: Be aware that refunds can be pending if account balances are insufficient, and handle them according to the charge type.
• Manage Disputes Wisely: For direct charges, disputes are debited from the connected account. For other charge types, they are deducted from the platform account.
• Test Your Setup: Before going live, conduct thorough testing of the charge and transfer processes to ensure everything functions smoothly.

All the tips mentioned above are just a small part of what you need to know when working with online payments and integrating payment processors. However, this knowledge can save you significant time, financial resources, and emotional stress while helping you avoid potential pitfalls.

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