Split Payments Between Sellers: What to Settle Before Building a Marketplace

A marketplace takes one payment from a customer and passes parts of it to several sellers. That sounds like a technical problem and is mostly a definitional one: who holds the money along the way, who issues the customer's document, who owns a refund, and what happens when one seller delivered and another did not. Those questions are settled before development, not after.

Which marketplace model are you building?

The first model is the simplest in every respect: you buy and sell, and sellers are suppliers. The second is the one requiring most clarification, because money passing through you on behalf of somebody else is a subject that needs proper arrangement and clear answers from your provider and your advisers.

What to ask the payment provider, before anything else

1. Whether the system supports splitting a payment between several beneficiaries, and how.
2. Whether each seller needs their own clearing account, or there is a sub-account structure.
3. Who is responsible for identifying sellers and collecting their documents.
4. How a refund works once the money has already been distributed.
5. What happens when a seller leaves with open transactions.
6. Whether your commission is deducted automatically, or you pay out and invoice separately.

The fourth question breaks plans: refunding a customer after money has reached the seller requires either clawing it back or absorbing it. Both possibilities need to be written into the seller agreement in advance.

Why a refund is the scenario you plan first

Because it is the only one touching every part at once: the customer wants their money, the seller has already been paid, and your commission has already been taken. Three rules that simplify it:

• Hold a retention window. Do not pay the seller immediately, but after a period matched to the nature of the product.
• Define who absorbs the loss if a seller does not return funds - and write it into the agreement.
• Link every payout to specific transactions, so you can offset against the next one.

The retention window is the central tool. It hurts sellers - they want the money quickly - so it is worth explaining in advance rather than springing it on them.

How sellers actually get paid

Moving money to multiple beneficiaries is a different operation from clearing. Masav's site presents a credits service for making payments to multiple beneficiaries, plus instant account-to-account payments and payment requests. In practice the options are:

• A credits file - suits a consolidated payout on a fixed schedule, weekly for example.
• Individual transfers - simple to start with, expensive in time once there are many sellers.
• Splitting at the payment provider, if it supports that structure.

The choice depends on seller count and frequency. Ten sellers paid weekly can be managed with a file; a hundred sellers paid daily need an entirely different structure.

What you need from each seller before the first payout

• Bank account details in the seller's name, not somebody else's.
• Business documents: a registration certificate or company number.
• A withholding certificate, where relevant to the arrangement.
• A signed agreement defining commission, payout dates, and refund handling.
• An address for sending remittance reports.

The same supplier onboarding pack described in checking a withholding certificate before paying a supplier applies here, and it is worth collecting before the first transaction rather than before the first payout.

What to measure in a marketplace

• Fulfilment rate by seller. It predicts refunds.
• Time from order to delivery, by seller.
• Refund rate by seller and by category.
• The gap between collected and distributed - which must be explainable to the shekel.
• Sellers who received no payout in the last period, and why.

The last metric is a safety mechanism. Money stuck on your side for no reason is an operational problem that quickly becomes a relationship problem.

What to define in the seller agreement

The agreement is where most problems get solved in advance, and these six lines are the minimum: the commission and how it is calculated; payout dates and the retention window; who owns shipping and warranty; what happens on a refund and who absorbs it; how bank details are changed and what verification is required; and how the relationship ends when transactions are open. Without the last line, a seller leaving becomes a negotiation rather than a process.

What breaks in a marketplace after launch

Five recurring failures, all stemming from decisions not made at the start:

1. A seller changing bank details with nobody verifying - a known fraud point.
2. An order split between two sellers where only one delivered. What happens to shipping and to the refund.
3. A commission changed mid-month, and a retroactive calculation nobody agrees with.
4. A seller who stopped responding while customers are waiting.
5. A gap between collected and distributed, discovered only at month end.

The first requires a procedure: changing bank details demands verification on a channel separate from the one the request arrived on. It sounds excessive until the first time somebody tries it.

When not to build a marketplace at all

Three situations where the simple model is clearly better: fewer than ten sellers, where you can simply buy from them and sell yourself; a product requiring warranty and service you provide anyway, so the customer comes to you regardless; and where the value you add is curation and quality rather than breadth of supply. In all three, a buy-and-sell model removes every question of splitting, regulatory arrangement and refunds - and leaves you with a business that is simpler to operate.

Sources

• Masav - credits service for payments to multiple beneficiaries and instant payments
• Shva - the Israeli card clearing infrastructure
• Bank of Israel - payment and settlement systems