How to Build a Bulletproof Pricing Strategy: A Guide for P2P Marketplaces

Peer-to-Peer (P2P) marketplaces have redefined the way individuals engage in commercial transactions. They leverage technology to connect suppliers directly with consumers, enabling them to buy, sell, or rent products and services without the need for traditional intermediaries. The historical evolution of P2P marketplaces, dating back to the 1990s, has significantly disrupted traditional business models, leading to the emergence of a thriving and dynamic online ecosystem which is reshaping online commerce. According to Statista, the sharing economy was valued at US $150 billion in 2023, and is projected to grow to a staggering US $794 billion by 2031.

Pierre Omidyar's experience with eBay in 1995, when he sold a broken laser pointer for $15, sparked the growth of one of the largest P2P platforms and paved the way for a multi-billion dollar industry to flourish. With the benefit of hindsight, it’s easy to see why peer-to-peer marketplaces have such huge potential: For consumers, these platforms are an affordable, convenient, and environmentally friendly alternative to traditional consumption. For aspiring entrepreneurs, on the other hand, marketplace businesses are an attractive business model. They are a way to start a scalable, game-changing business with limited resources. In 2024, the market is teeming with diverse P2P marketplaces that cater to various consumer needs and the stage has been set for this to scale to new heights in 2025.

Sharing economy growth projection from Statista.

How Marketplaces Generate Revenue

P2P Marketplaces typically generate revenue through leveraging a mix of the following:

1. Commission

This is typically the most popular business model for marketplaces. It means your marketplace gets a piece from every value transitioned via the platform. It is a primary monetisation model for the likes of Airbnb, Uber, eBay, and other marketplace giants. It is simple yet gives you some options to adjust. Here’s a breakdown of some of the options:

• charge commission from the customer or provider, or both
• set the same commission rate for all to implement few different schemas based on their performance (providers) or amount of purchased services (customers)
• set the lower rate at the beginning to attract the providers or customers
• charge a flat fee or a % from the cost of service

The exclusiveness of the services paves the way for experiments and getting additional value.

2. Subscription

It is a revenue model with charges of a recurring membership fee to access the marketplace. It’s an option for marketplaces that bring high value for providers and customers, but for some reason, it’s hard - or sometimes near impossible - to facilitate payments. It is a standard business model for C2C marketplaces (Home Exchange or all sorts of dating apps). In B2C, it’s popular among platforms with recruiting options, like LinkedIn and StackOverflow.

3. Pay-as-you-go

For B2C marketplaces, this model enables customers to make a one-time purchase of a product or service without additional subscription fees. It is a standard for many service providers, which has become immensely popular for marketplaces. For instance, when you pay for posting a job offer on a marketplace, where professionals in any field provide their services.

4. Freemium

This business model is a mix of free and premium services and features. Users can access basic features at no cost, whereas the additional functionality is available only for subscribers. It works well for online services like Grammarly, Dropbox, etc.

However, startup marketplaces can also benefit from it. For example, if your marketplace sells mentorship or consulting services, you can think of adding free expertise content that is relevant to your customers. Or open the discussion board, where your experts would answer questions for free or share helpful information. It can help you attract customers after launch, nurture them and encourage them to pay for services.

5. Listing Fees

Easy as it is: the users (providers) must pay for their listing on your marketplace. It’s a promising monetisation strategy for marketplaces with lots of traffic who are offering a wide range of goods and services. Providers can control costs and aren’t forced to pay for anything except listing certain items. On the other hand, paying for listings doesn’t guarantee that providers will sell their items or services. To do that, they need to be sure they list their offering on the marketplace with many customers ready to pay for whatever they have.

Using listing fees might be tricky if you want to focus on services for a specific target audience.

6. Lead Fee

It’s a combination of the listing fee and the commission models. Providers pay for making a bid for real customers with specific requests. It’s a better offer for providers because they need to pay only when they want to contact the potential client with an inquiry. If the value of such leads is high (e.g., at Thumbstack), this monetisation strategy works well.

7. Advertising

This model is well suited to marketplaces with a significant number of providers and helps them maximise their sales (Zillow, Uber Eats). The options are sponsored banners, third-party product listings, text advertising, and combo. If you also charge commission from sellers, customers, or both, you’re highly interested in boosting the number of deals.

8. Sign-up Fees

This model requires vendors to pay a flat fee for joining the platform. It’s not as popular as some of the others, but there are examples like e-commerce and affiliate marketplace ClickBank, that deliver digital and physical goods.

It helps you set the revenue forecasts without knowing the sales volume. However, it’s challenging to persuade sellers to pay you before registration.

Illustration from Fulcrum.

The the long, and the short of it: marketplaces are employing diverse revenue streams to create a sustainable business model that drives sustainable growth.

The Evolution of Online Marketplaces

The opportunity for anyone to independently sell their own products and services through B2B, B2C, and P2P online marketplaces has propelled the way the world conducts financial business on a global scale. Merchants in their respective markets can now cater to larger consumer bases, breaking past previous geographical barriers, and users can access unlimited categorised products based on personal needs, wants, and price. In this evolution of marketplaces, the ever-changing landscape of e-commerce has always called for seamless, innovative customer experiences no matter the niche, product, or service, for both buyers and sellers alike. And payments is not exempted.

As marketplaces scale, so too has their need to quickly launch new payment methods to tap into new markets. While the initial wave of API-based solutions allowed platforms to tap into third-party solutions to enable specific functionalities like offering online payment acceptance, the economics associated with that functionality largely accrued to the third-party API provider. In recent years, we’ve increasingly seen API-based fintech solutions (like Stripe, Adyen, etc.) that allow platforms to not only offer certain functionality (e.g., online card acceptance, BNPL, etc.), but also enables them to capture a portion of these economics (e.g., payment fees).

Although monetising payments has become an attractive revenue generator for marketplaces, making sure your payments are profitable and protecting your bottom line is not as simple as it may seem. Reports received from payment processors typically consists of hundreds (if not thousands) of lines of spreadsheets through which an individual - or team of (expensive) individuals - has to sift through manually. In addition, payments data is typically aggregated to monthly or quarterly figures leaving platforms and marketplaces blind as to whether or not their payments are actually profitable. From what we’ve seen at Revenew, up to 20% of payments can be loss-making. Multiply this by thousands/ millions of payments and we’re talking about a chunk of lost revenue big enough to make your insides turn.

When we speak with those in charge of answering the question (often a CFO, VP of Payments or VP of Finance) around how one ensures that you’re pricing in a way that makes sense for you and your customers, the answer we often receive most often is “I don’t know”. Our conviction at Revenew is that platforms who have a deep understanding of their payments’ financial performance are best placed to maximise the financial upside from their embedded payments while retaining their customers through ensuring margins are profitable, yet fair and competitive. We’ve built payments intelligence- and growth tooling products for exactly that.

Get The Clarity You Need

How do I protect my bottom line and maintain margin profitability? The truth is that the answer isn’t a simple one: Platforms and marketplaces integrating payment processing services must carefully manage the dynamic relationship between fluctuating processor fees and their fixed or variable customer fees, and there are a number of considerations when developing an effective pricing strategy such as the popularity of different payment methods, other revenue streams, and fluctuations in scheme pricing.

These variables introduce additional complexities and fees into your payment processing, making it vital to have a detailed understanding of your margins to avoid loss-making payments, because the reality is that the floor is not zero:

Your platform may not only be giving its services away - it could actually be paying to do so.

The success of a P2P marketplace pricing strategy hinges on whether the marketplace’s fee (also known as the take rate) is greater than its processing fees (also known as the buy rate). From what we’ve observed at Revenew, platforms often struggle to accurately determine their buy rate (particularly when dealing with variable - and often opaque - IC++ fees).

To simplify how payments are managed, we’ve built Revenew Clarity to empower platforms and marketplaces with all of the insights, data, and knowledge they need to gain an in-depth understanding of their business to answer questions like:

• How many of my payments are loss-making? Why are they loss-making to begin with?
• Which customers are my most profitable/ least profitable?
• Which payment methods should I adjust to help me achieve my overall net margin goal?

Armed with this knowledge, marketplaces are able to easily diagnose margin health, implement intelligent pricing strategies and create advanced payment flows that cater to their unique needs without the need to do the heavy-lifting of building these capabilities in-house while simultaneously reducing risk and boosting profitability.

Managing Multi-Seller Baskets

If you’ve ever purchased goods from online marketplaces such as Amazon and Ebay, chances are you’ve had exposure to multi-seller baskets. This capability enables marketplaces to allow their customers to buy products from multiple sellers in a single transaction (see illustration below). Once the payment has been processed, the platform disperses the appropriate funds to their sellers less their commission fee.

Multi-seller baskets split a single payment between the marketplace and two or more sellers.

Stripe’s Existing Solution

Stripe Connect currently only supports single-seller payments. When initiating a payment, you specify a single destination recipient of the funds (your seller) and the amount they should receive (either via transfer amount or by specifying an application fee to deduct). If the payment succeeds, the specified amount will be transferred automatically to the seller’s Stripe account. Additionally Stripe provide links between the Platform and Seller within their Dashboard:

The platform’s view of the payment

The seller’s view of the payment

Unfortunately, there is no built-in way to process payments for multiple sellers. Stripe’s solution for platforms is to manually execute the transfers to each seller.

Considerations

Additional integration complexity - Marketplaces leveraging multi-seller baskets on Stripe Connect needs to build transfer orchestration logic. This increases the cost and complexity of the integration vs single-seller baskets.

Seller reversals are not supported - If a payment with multi-seller transfers is refunded, the seller transfers are not reversed. The onus rests on the platform or marketplace to reconcile the amount owed either by reversing the transfers (provided funds are available) or by reducing subsequent transfer amounts.

Application Fees are not supported - Application Fees improved on setting the absolute transfer amount in that they provided greater visibility to sellers of their fees and provided insights to platforms on their overall fee revenue. With the above flow, application fees can no longer be used.

Lack of reporting - When using separate charges and transfers you lose the automatic links between the platform and seller payments within the Stripe Dashboard. This increases the operational complexity and cost of these payments significantly since the platform would inevitably need to build its own reporting solutions for itself and its sellers.

Increase Margins, Limit Exposure and Accelerate Growth

We have built Revenew Boost to give you the most flexible marketplace payments experience where multi-seller baskets are covered from the outset.

The benefits:

1. No additional integration work required: To limit any additional integration work, Revenew provides a metadata API that enables marketplaces to leverage its existing Stripe integration to pass routing instructions (seller splits) to Revenew.

2. Automatic processing of refunds: When a multi-seller payment is refunded, according to the platform’s preference, Revenew will automatically recover the necessary funds. If funds are not available in the seller’s balance subsequent seller payments will be adjusted to recover the funds.

3. Granular reporting from both platform and seller perspectives: Revenew’s Payments Model has native support for multi-seller baskets. Revenew provides full visibility into seller splits (aggregating them in individual seller stats) and we will eventually allow platforms to open up a portal directly to their sellers.

And this is only the tip of the iceberg - we have a number of exciting features lined up for 2025.

Navigating Direct Charges

Direct charges are a payment flow where funds are initially sent directly to the connected account of a seller on a platform, before fees are forwarded to the platform itself. This approach is particularly suitable for platforms that work with larger merchants or those who are already using Stripe for other online businesses.

How Direct Charges Work

1. Customer Pays: The customer (in this example, a beer enthusiast) makes a payment to the platform.

2. Funds to Connected Account: The funds are directly transferred to the seller's Stripe account.

3. Platform Fee: The platform's fee is deducted from the seller's account and sent to the platform.

4. Seller Receives Payment: The seller receives the remaining funds in their Stripe account.

With direct charges, funds are moved directly to the connected account, before fees are forwarded to the platform.

Considerations

1. Single-Seller Transactions: Direct charges are best suited for transactions involving a single seller. Multi-seller transactions, like those in marketplaces with shopping carts, may require a different payment flow.

2. Platform Fees: Platforms can charge sellers fees for using their platform, which can be deducted from the funds before they reach the seller's account.

3. Chargebacks and Disputes: The seller is responsible for handling chargebacks and disputes, as they are the merchant of record.

Simplicity is The Ultimate Sophistication

Managing payment data and processing fees can be is complicated. Platforms and marketplaces need real-time access to consolidated reports on collections, margins, fees, payouts, chargebacks, and other key metrics which are not readily available today without a lot of manual leg-work. From what we’ve seen, platforms and marketplaces who are manually compiling this information are taking at least 10 minutes per payment as illustrated in our recent case study with B2B Fintech Infrastructure SaaS business, Monite. This can have a significant impact on operational efficiency, and the cost implications can be crippling - especially where margins are already razor-thin (see Revenew Co-Founder, Ben Foster’s, latest blog post where he underscores the importance of intelligent pricing solutions tools to help platforms avoid negative margins on low-value transactions).

Revenew’s automated reporting tools helps platforms simplify this process, allowing them to focus on delivering exceptional experiences for their customers on both sides of the equation rather than getting bogged down in cumbersome, time-consuming administrative tasks:

• By automating the reconciliation of interchange++ (IC++) fees, platforms can minimise the risk of human error in financial reporting.
• Streamlined processes mean less time spent on manual reporting, allowing staff to focus on automating repetitive tasks and driving customer engagement.
• Revenew provides detailed reports that give platforms a clear overview of their payment activities and associated fees, helping you to define and execute a successful payments strategy.

Only the Beginning

Embedded payments have opened up a whole new world for platforms and marketplaces, where we’re seeing a substantial portion of revenue being generated from payments. As platforms continue to evolve and expand, having an intimate understanding of your payments’ financial performance - and the tools to optimise these - becomes a crucial component of your platform payments strategy - and your business’s viability at large.

By utilising Revenew’s detailed payment insights and intelligent pricing controls, platforms can significantly improve their financial performance while staying focussed on delivering second-to-none customer experiences. In a landscape where competition is fierce and consumer preferences are rapidly changing, marketplaces that embrace innovative payment strategies and dynamic pricing models will be well-positioned for sustainable growth. If you’re a P2P marketplace and you would like to discuss how we can help level up your payments intelligence, boost your margins and improve your operational efficiency with best-in-class tools, reach out to us by visiting https://revenew.co/contact or send us an email at info@revenew.co.