We recently wrote about key benefits of online marketplaces, but today, we want to focus your attention on crafting the booking flow and payment system of your service marketplace. Both of these flows are essential in delivering an outstanding user experience so you get as many transactions as possible.
In this article, we talk about a business hurdle related to the booking flow, which ultimately leads you to a successful transaction flow. We use our own examples to show how SteelKiwi has done booking flows and payment flows in practice for our clients who have asked us to build service marketplaces to meet diverse business requirements.
Key elements of booking flow
The ordering process in online stores is largely universal: you choose an item, add it to your cart, place an order, and pay. The booking flow for online marketplaces is built on the same principle, only its key elements are time, location, and price.
When we say time, we mean when the service will be provided. A service can be delivered in real time (on-demand) or be scheduled in advance. The type of delivery depends on the client’s needs and the provider’s availability.
If your service is based on the on-demand approach, your marketplace platform should indicate whether a provider is currently available. When scheduling in advance, clients usually filter their search, for example by the availability of providers for certain dates or times. Thus, providers need to have updated calendars.
One question you need to ask is whether the location at which the service is provided is important. Some services can be provided virtually, while others like a haircut or a house rental require the presence of either a provider or customer (or both) at a specific location. In this case, location becomes key to the booking experience. Providers may want to serve customers that live nearby. Or clients may want to deal with providers in another city. Both sides need to indicate where they want to conduct business.
By and large, the price of the service provided can be determined within the platform. The less negotiation between clients and providers the better, as it lessens the chances of needing an intermediary. A packaged service can be purchased with a checkout flow, whereas a negotiated offer requires a more complex process.
Packaged offers also allow customers to easily compare different service providers. For instance, if a marketplace works with hair stylists it might offer six standard haircut packages so that clients can easily compare the same service from different stylists. Using the same name for the same service significantly simplifies comparison for clients.
You should always analyze the possibility of creating packaged and standardized offers across different providers.
In cases of perfect competition—where the platform makes a decision for the client— there’s no differentiation among service providers. Clients are not as much focused on who will serve them as on the service itself. This model is relevant when services happen almost instantly like booking a taxi and with a fixed price.
Many successful marketplaces standardize the price of even complex service offers. For example, an online marketplace can take users through a questionnaire about what they need and determine the price based on those answers.
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Booking flow designed by SteelKiwi
Based on how your marketplace combines time, location, and price, you can form a comprehensive booking matrix. Here’s how we’ve implemented booking systems in some marketplaces we’ve built.
The Snaapy booking flow
Snaapy is a service booking marketplace that promotes small and midsized businesses that offer on-demand services. It has the following booking flow for authorized users:
1. Choose a business
2. Choose the type of service
3. Choose the branch where you want the service delivered
4. Choose a provider (if the business offers this option)
5. Select a date and time
6. Confirm the booking
1. Choose a business
2. Choose a branch
3. Select a service available at the branch
4. Choose a provider (if the business offers this option)
5. Select the date and time
6. Confirm the booking
For more information about the Snaapy project, see our case study.
The NexDep booking flow
NexDep is a service marketplace that offers legal services to clients who need to arrange court hearings. In NexDep, it’s not clients who look for providers but rather providers who pick jobs they’re interested in. The platform has the following booking flow:
- Choose the session type
- The list of questions is determined by the session type.
- Set the location of the arbitration.
- Indicate the date and time of the arbitration session.
- Provide general information about the case.
- Fill in information about the lawyer.
- Select additional services (additional job offers will be created for various professionals).
- Indicate when you expect delivery.
- Upload any necessary documentation.
- Finally, confirm the order.
NexDep uses a matching algorithm to match providers with sessions. All sessions are sorted and added to providers’ lists of jobs according to information that providers give about themselves. Requirements must match capabilities in order for a provider to see a particular session on their list.
Key elements of payment flow
If a platform acts as an intermediary that handles transactions, then the platform’s main goal is to handle those payments well.
Paying via a marketplace
You need to decide whether handling marketplace payments is relevant and necessary for you. In most cases it will be. To implement transactions via your platform, you’ll need to decide on a payment method, checkout process, and payment delivery schedule.
Various payment methods
Give users multiple payment options. Credit cards are used across the globe and are perfectly suited for online marketplace payments. Credit card companies usually protect users from fraud. Paying by direct bank transfer is common too. However, bank transfers lack fraud protection and the ability to preauthorize transactions.
PayPal is a powerful and quite famous marketplace payment platform which has built trust among its users. PayPal allows users to send money to companies or individuals even if they’re located abroad. It also has a good protection program that covers both parties to a transaction. This protection program is also used when selling products and helps buyers and sellers get their money back if anything goes wrong.
Online transactions are regulated and therefore involve bureaucracy. If your providers prefer credit cards, your platform needs to be PCI compliant. If you want to skip the paperwork, you can choose among the following marketplace payment processing services: Marketplace, Stripe Connect, MangoPay, and Braintree. The fees for Stripe and MangoPay are no higher than for PayPal. These marketplace payment gateways are easy to integrate, but they don’t have protection programs like PayPal does and may not be available in some countries.
Each marketplace usually has a unique checkout process. Generally speaking, a client chooses a service or product, confirms the booking, and pays (if online payment is available). In the case of service marketplaces, a shopping cart may be not necessary. Carts add an extra step, and it’s best to have as few checkout steps as possible.
Decide whether registration on your platform will be compulsory during checkouts. Some platforms skip the registration or login step, however marketplaces like Airbnb and Etsy require users to sign up. In this way, the platforms get more information about users to prevent possible fraud.
Money shouldn’t be immediately transferred to providers via service marketplaces. Special business logic should be integrated into the digital money flow. The way money is transferred greatly depends on the type of booking and the business processes. A system should consider situations such as cancellations (early and last-minute) and no-shows and build a refund procedure.
Paying money to service providers
Transferring money in marketplaces is more complicated than in online stores since money needs to be transferred to providers. Consider when to transfer money to providers and how to do so.
When to transfer money
It may not be the best option to transfer money to a provider as soon as the client pays. Part of a platform’s value proposition is that it acts as a trustworthy mediator who ensures that the client receives the service and the provider gets paid. It’s reasonable to delay the payout until the actual day the service is provided.
You can deal with transactions between your clients and providers in two ways. The first is to become a service provider yourself. In this case, transactions will happen between you and the customer. You’ll then have a financial relationship with providers. In other words, you’ll take responsibility for everything that happens on your platform and for the level of service as well.
Alternatively, you can let the financial relationship exist between the provider and the client without your involvement. The system can delay the payout, however, for example through escrow, where your platform holds the money a client has sent to a provider.
In the United States, escrow is regulated on the state level. You may need to get a state license in order to hold funds. Other countries have their own regulations. Some payment gateways such as Braintree Marketplace in the US and MangoPay in Europe offer an escrow solution for marketplaces. These marketplace payment solutions lessen the legal burden for platform owners. On the other hand, WePay and Stripe collect credit card details and charge the card only when it’s time to transfer the money. PayPal does not offer escrow.
Before a provider can get money, they need to verify their identity through a process called Know Your Customer (KYC). The information necessary for this check depends on the country the service provider is operating in and how much money they’ll be getting. It’s usually possible to get up to a few thousand dollars with a simpler review. If the provider is to receive more money, a more thorough review is needed. Stripe has created a handy guide for several countries about the minimum information needed for the review. To get a better idea on global payouts, read this comprehensive guide put together by payout company Adyen.
If you want to charge commission for transactions, you need to decide when and how to charge it. As we discussed above, receiving money and transferring it to a provider can be difficult from a regulatory perspective. You should either split the payment into two separate transactions—one going to the provider and the other to you—or move the whole amount to the provider and charge your commission fee to them after the transaction.
To understand how your marketplace functions and detect any inappropriate behavior from clients or providers, you should develop a review system. This system should give you a better picture of how actual service delivery happens. Having a review system will attract more users to your marketplace since a good reputation is as important to clients as it is to providers. Ratings should be allowed only after real transactions. You can encourage users by email to leave reviews or let users leave reviews within a certain period of time after a session.
Reviews usually contain a one- to five-star rating or a binary thumbs up or down and a comments section. You may also want to ask the parties involved to give a numeric rating for different aspects of service delivery.
A review system is a good way to provide a sense of responsibility and dignity to providers and clients alike.
Payment flow developed by SteelKiwi
We’ve developed several service marketplaces that each have a different payment flow. Let’s closely look at how transactions happen on these platforms.
The Snow Sensei payment flow
Snow Sensei is a platform to help clients find and book snow sports instructors. Clients can schedule and pay for classes a month or more in advance. Here is the platform’s payment flow.
First, a client chooses a snow sports instructor. To pay, the client can choose an existing card or enter a new card number. If entering a new card number, a new record is created in their account by the Stripe system. The platform remembers the card number, and the user doesn’t need to insert it the second time. After that, the platform books a session with the instructor for the date chosen by the client.
Some clients book far in advance, and in this case the platform puts the money on hold for 90 days (so the client can’t spend it on something else).
If a client books a session half a year in advance, a timer is started. The timer will put this money on hold two months before the scheduled session.
If the client decides to cancel more than 30 days in advance, then they get a total refund. If they cancel within 29 to 14 days, then 50% goes to the instructor and 50% is returned to the client, plus Stripe charges commission. If they cancel less than two weeks beforehand, then they don’t get any refund.
If the instructor cancels, then all money is sent back to the client. In case of no-shows, the party who shows up can report a No Show. If this happens, the platform administrator receives an email and will fully refund the money to the party who showed up. If the flow is successful and both the client and the instructor show up, then the instructor gets 100% minus a small commission from Stripe.
The Your Living-room Trainer payment flow
We’ve also built another online training platform with a different payment flow.
With Your Living-room Trainer, trainees can book training sessions one month in advance. The system charges users right after booking and the money is transferred to the trainer's Stripe account and it’s put on hold.
In case of cancellation, the booking system returns the money to the trainee. Trainees can cancel or reschedule any training until 24 hours before it starts.
After a session, the trainee has three days to ask for a refund. The money becomes available to the trainer after seven days. Trainers can withdraw the money manually in payment settings and deposit it to their bank account. The service fee is 20% of the cost of training. If a trainer doesn't withdraw money for more than 80 days, the system deposits it automatically.
Trainees don’t pay platform fees, as they’re covered by trainers. Trainees pay only for the classes they take, i.e. for their trainers’ time.
How to build an online marketplace
The booking flow and payment flow are the two pillars of service marketplaces. They should integrate well into your ecosystem to facilitate interactions between clients and providers. To create a service marketplace, you need to analyze what metrics are essential for booking and decide whether transactions through your platform will be compulsory. Transactions should add convenience rather than create headaches. Create a safe and trustworthy environment for your users that will make both clients and providers adopt your platform to complement their routines.
Our expertise allows us to build service marketplaces of any complexity with great booking flows that fit your business logic. Each marketplace we’ve built has its own particular booking and payment system. We can assist you in building your own platform or MVP to begin with. Get in touch with us to present your idea. One of our sales representatives will get back to you shortly.