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Stripe Connect Explained: The Best Way to Do Marketplace Payouts
MT
MVPHub Team
•
4 min read
Stripe Connect Explained: The Best Way to Do Marketplace Payouts
Stripe Connect is the payment infrastructure that powers marketplace payouts. It lets you charge buyers, take a commission, and pay sellers — all through a single, compliant system. Here's how it works.
Stripe Connect Account Types
| Type | Onboarding | Dashboard | Best For |
|---|---|---|---|
| Express | Stripe-hosted (fast) | Stripe-hosted (limited) | Most marketplaces (recommended) |
| Standard | Stripe-hosted (full) | Full Stripe Dashboard | Sellers who want full Stripe access |
| Custom | You build it | You build it | Maximum control (complex) |
For MVP: Use Express accounts. Stripe handles identity verification, tax forms, and compliance. You just redirect sellers to Stripe's onboarding URL.
The Payout Flow
Step-by-Step
- Seller onboards → You create a Stripe Connect Express account and redirect seller to Stripe's onboarding
- Stripe verifies seller → Identity check, bank account setup
- Buyer pays → Stripe Checkout creates a payment
- You take commission → Application fee is deducted automatically
- Seller gets paid → Stripe transfers funds to seller's bank account (usually 2 business days)
Payment Models
| Model | How It Works | Best For |
|---|---|---|
| Direct charges | Charge goes directly to seller's Stripe account; you take an application fee | Simple marketplaces |
| Destination charges | Charge goes to your platform; you transfer to seller | When you want control over the flow |
| Separate charges and transfers | You charge the buyer and create separate transfers to sellers | Multi-seller carts |
For MVP: Destination charges are the simplest. The payment lands in your Stripe account first, and you specify how much goes to the seller.
Commission Implementation
Application Fee (Simplest)
When creating a Checkout Session, set payment_intent_data.application_fee_amount to your commission in cents:
Buyer pays $100
application_fee_amount: 1500 (15% = $15.00)
Seller receives: $100 - $15 - Stripe fees = ~$81.80
Platform keeps: $15.00
Configurable Commission Rates
| Model | Example | Implementation |
|---|---|---|
| Flat percentage | 15% of every sale | Simple multiplication |
| Tiered | 15% up to $1K/mo, 10% above | Check seller's monthly volume |
| Category-based | 10% for physical goods, 20% for digital | Look up category commission rate |
| Flat fee | $2 per transaction | Fixed application_fee_amount |
Seller Onboarding Flow
What You Build
- "Become a Seller" button on your platform
- API endpoint that creates a Stripe Connect account and returns the onboarding URL
- Redirect handler for when the seller completes (or abandons) onboarding
- Status tracking in your database (pending, verified, restricted)
What Stripe Handles
- Identity verification (ID upload, selfie)
- Bank account connection
- Tax information collection (W-9 for US sellers)
- Compliance checks
- Ongoing monitoring
Essential Webhooks
| Event | Action |
|---|---|
account.updated | Update seller's verification status |
payment_intent.succeeded | Confirm payment, create order |
transfer.created | Log payout to seller |
payout.paid | Seller's bank account received funds |
payout.failed | Notify seller about payout issue |
Common Mistakes
| Mistake | Consequence | Fix |
|---|---|---|
Not checking charges_enabled before allowing sales | Seller lists products but can't receive payments | Check status before activating seller |
Not handling account.updated webhook | Seller's status changes without your app knowing | Always handle this webhook |
| Using Custom accounts when Express suffices | Months of extra compliance work | Start with Express |
| Not testing with test mode accounts | Real money errors in production | Always develop in test mode |
Building a marketplace? Read How to Build a Marketplace MVP.
Need a template? Browse marketplace templates on MVPHub.
