“What payment system does Airbnb use?”, “Who is the payment gateway and processor behind Uber?”, “What payment processor/gateway do big websites use like Uber, Airbnb, Lyft, Reddit, LinkedIn, etc?”
These are the typical questions, which are asked by many people on a regular basis. Most probably, you can find accurate answers to these and similar questions only if you consult the management of the aforementioned companies. We do not know the managers of these companies and, consequently, the answers to the listed questions. However, we feel that people, asking such questions, just want to implement payment processing logic, similar to the logic used by Airbnb and Uber, in their applications. In this article we will try to explain the essence of this logic, and provide guidelines for those, who search for similar solutions.
So, what is the common feature, which unites Airbnb, Uber, and other similar companies, emerging with every coming day?
Airbnb is a marketplace for accommodation rental, while Uber is a marketplace for transportation services. Vacation rental and online transportation networks are not the only business types. If we set company names aside, we can see that the common feature is an online marketplace business model. A marketplace is an online setting, where various small-size vendors offer their products and services to various customers. In cases of Airbnb and Uber these vendors are either individuals or small businesses, providing services to other individuals and small businesses.
Online marketplaces, generally, face a challenge when it comes to payment processing. When a customer makes a purchase the payment amount should, generally, be split between multiple parties. For instance, in the case of Uber, some part of the amount should be retained by the corporate office, providing the software product, while another part should go to the driver. The case of Airbnb is conceptually the same. In some other cases, the number of recipients may be larger. For example, tomorrow Airbnb may allow cleaning companies to register on the web-site and provide their services to accommodation owners. As a result, during each rental, the payment will include Airbnb’s share (payment for web-site/online marketplace operation), the accommodation owner’s share, and the cleaning company’s share. Moreover, some part of the payment may represent taxes. Distribution of such payments is a serious challenge. Making separate charges for each recipient from the customer’s card is undesirable.
The challenge around payment distribution is solved through split funding (or split payment) mechanism. Different companies offer this mechanism as a service on the market. For example, PayPal is offering adaptive payments, Stripe and some new payment gateway software providers (such as United Thinkers) support split payment functionality, while Zift offers such functionality to software vendors.
In most cases a company like Uber of Airbnb follows a classical payment facilitator model. Uber drivers (or Airbnb accommodation owners) are its sub-merchants that need to be funded. As the number of these sub-merchants is large, beside split funding, smooth merchant on-boarding, provisioning, and remittance logic is also extremely important.
For most present-day marketplaces the opportunity to automatically onboard and provision newly singed-up merchants (or sub-merchants) is extremely relevant. In the case of Airbnb these sub-merchants are accommodation owners, while in the case of Uber they are car owners. That is why another important technology alongside split payment mechanism is merchant on-boarding technology (otherwise provisioning of each new sub-merchant would be a laborious procedure).
Conclusion
If your company uses an online marketplace business model and you want to “replicate” the business operations mechanism of Uber or Airbnb, try to find a payment service provider that supports split funding mechanism, has a smooth merchant on-boarding system, and compiles clear merchant statements, that would be easily interpreted and used for reconciliation by your customers.
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