Payment Service Providers

Stripe Connect Deep Dive: An Essential Guide on Fees and Features

Read Time: 11 min

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Marketplaces are driving considerable economic activity in the United States, and Stripe Connect is playing a significant role in this sector. This year’s eCommerce marketplace sales volume is expected to exceed $380 billion.[1]Insider Intelligence. “How marketplaces from Amazon, eBay, and Walmart compare“. Accessed April 24, 2024.

While traditional merchant accounts and payment service providers (PSPs) can process payments directly from a consumer to a merchant, the process is more complicated for marketplaces and other platforms with multi-party transactions. However, some services streamline the backend of multi-party transactions, making it simpler to process payments between parties on a singular platform.

Stripe Connect is a payment platform built explicitly for platforms and marketplaces. But it’s not the only one. This guide explores this solution, how it differs from Stripe, the types of accounts it offers, its features, how it compares against competitors, and other related topics.

What is Stripe?

Stripe is a financial technology company that provides online payment processing services to businesses of all sizes. It first began offering services to merchants in 2010. Estimates now suggest more than 1.13 million live websites use Stripe to process payments.[2]FinMasters. “15+ Stripe Statistics for 2023: Revenue, Market Share & Users“. Accessed April 24, 2024. Its core offering includes a suite of developer-friendly APIs and tools that allow businesses to accept and manage online payments seamlessly. Stripe supports credit and debit card payments, digital wallets, and alternative payment methods. While in-person payments aren’t Stripe’s focus, it now offers a range of physical card readers and POS options for omnichannel selling.

Beyond payment processing, Stripe provides additional services such as subscription billing, fraud prevention, and secure customer data storage. It simplifies the complexities of online commerce, enabling businesses to create customizable checkout experiences and automate recurring billing for subscription services.

Stripe’s global reach allows businesses to accept payments in multiple currencies and regions, making it popular with international eCommerce entrepreneurs. With a focus on user-friendly documentation and robust developer support, Stripe is a favored platform by many businesses wanting custom digital payment solutions.

What is Stripe Connect?

Stripe Connect is a specialized platform provided by Stripe for businesses operating marketplaces, platforms, or gig economy models. It enables businesses to manage payments and payouts between multiple parties. With Stripe Connect, you can onboard and verify sellers or service providers, set up custom fee structures, and facilitate split payments, ensuring financial transactions from all parties involved.

Connect helps marketplaces facilitate handling funds, compliance, and reconciliation while maintaining a secure and compliant environment. The solution is highly customizable and supports various business models, making it a go-to for platforms like ride-sharing apps, eCommerce marketplaces, and more.

What is the Difference Between Stripe and Stripe Connect?

Stripe and Connect are both payment processing solutions, but they serve different purposes within the Stripe ecosystem.

Stripe is a payment gateway and processing platform that allows businesses to accept online customer payments. It provides a set of APIs and tools to integrate payment processing into websites and apps. With Stripe, businesses can accept credit card payments, handle subscriptions, and manage transactions securely and easily. It’s suitable for businesses of all sizes looking to process payments. However, as Stripe doesn’t require extensive underwriting and makes payment processing readily available, it’s very popular with small businesses.

Stripe Connect, on the other hand, is an extension of Stripe designed for marketplaces and platforms. It enables businesses to facilitate payments between multiple parties, such as customers, sellers, and service providers. It offers features like split payments, seller onboarding and verification, and customizable fee structures. It’s a versatile solution for businesses building platforms or marketplaces connecting buyers and sellers.

In summary, while Stripe is a general payment processing platform for businesses, Connect is tailored for marketplace and platform businesses, offering specialized tools to manage multi-party transactions and payouts.

Stripe Connect Account Types

There are three primary account options available for marketplaces and platforms:

An orange i in a blue circle.


Standard accounts are individual accounts for your platform’s sellers or service providers. They can receive payments for their products or services. Standard Accounts are easy to set up and offer a straightforward way for sellers to get started. However, they have limitations regarding customization and control over funds disbursement.

light blue i in an orange circle.


Express Accounts are a step up from Standard Accounts. They provide more flexibility for sellers by allowing them to customize their profiles and payment methods. They can also handle additional business data. This option is suitable for businesses that want to offer a more tailored experience to their sellers.

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Custom Accounts offer the highest level of control and flexibility. Businesses can define specific onboarding processes, verification requirements, and disbursement rules for their sellers. This is ideal for platforms that enforce complex compliance or revenue-sharing models.

Stripe Connect Charge Types

There are three primary charge types available to marketplaces and platforms:

Direct Charges

With Direct Charges, the platform or marketplace business user directly charges the end customer for the products or services they purchase on the platform. With direct charges, marketplaces don’t need to disclose Stripe as the payment distributor. The funds flow directly to the marketplace’s Stripe account, and then the platform is responsible for distributing the earnings to the sellers or service providers. This is suitable for platforms that want full customer experience and pricing control.

Destination Charges

With the Destination Charges model, the platform business collects customer payments on behalf of the sellers or service providers. The funds are first directed to the platform’s Stripe account, and then the platform uses the Stripe API to instruct Stripe to split and transfer funds to the sellers’ or service providers’ accounts. This method offers more control to the platform over how revenue is distributed.

Separate Charges and Transfers

Separate charges and transfers are for more complex marketplace transactions. This type of charge occurs when a variety of circumstances arise, including:

  1. When a transfer cannot be made at the same time as the charge
  2. When there are multiple users involved in a single transaction
  3. When a user isn’t known to the platform at the time of charge

A good example of a scenario involving separate charges and transfers is an online marketplace that allows for a single checkout process when a customer purchases multiple goods from separate marketplace retailers.

Stripe Connect Fees and Pricing

While there’s no doubt the solution offers a range of premium features to platforms and marketplace businesses, it’s critical to consider fees and pricing. Let’s explore the costs below:

After initial processing costs are subtracted from the payment, it’s time to assess additional fees (these vary depending on which account you choose):

Fees for Onboarding, Verification, and Compliance (Ongoing)

  • Standard Account: No fee
  • Express Account: $2 per active user (per month)
  • Custom Account: $2 per active user (per month)

Funds Routing and Platform Management

  • Standard Account: No Fee
  • Express Account: 0.25% of payout volume
  • Custom Account: 0.25% of payout volume


  • Standard Account: Varies
  • Express Account: Varies
  • Custom Account: Varies


  • Standard Account: No Fee
  • Express Account: 25¢ per payout
  • Custom Account: 25¢ per payout

Instant Payouts

  • Standard Account: 1% of payout volume
  • Express Account: 1% of payout volume
  • Custom Account: 1% of payout volume

Core Features of Stripe Connect

Let’s explore some of the core features available:

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Payment Flexibility

As Connect benefits from many of the same features as Stripe Payments, marketplace users can access various payment options. Connect offers credit card payments from all major card brands, digital payments, ACH transfers, invoicing, subscription payments, and more. Likewise, platform and marketplace users gain access to an array of international transaction options. Stripe has various local payment choices in overseas markets, making it simple for international customers to use marketplaces and platforms supported by Stripe Connect.

A blue lightbulb

Easy Onboarding

Stripe Connect offers more than standard payment functionality; it also serves as an onboarding service for marketplaces and platforms. It’s easy to onboard users and customers using Connect. Stripe handles all Know Your Customer (KYC) requirements, helping reduce your business’s compliance requirements. Likewise, Connect easily links with US bank accounts for payouts. In many cases, it only takes a few minutes for users to be onboarded, making your marketplace an attractive seller option.

hands exchanging money

Tax Management

Stripe Connect automatically facilitates tax management, ensuring your business remains tax-compliant with local and international sales tax laws. Whether you need to add sales tax to a US purchase or VAT to a UK purchase, Stripe has your marketplace covered.

Orange dollar

Fund Distribution Control

Marketplaces have full control over fund distribution, ensuring platforms with complex distribution requirements have all the tools to keep users happy. Whether facilitating direct charges between a user and a customer or complex distributions to multiple users, Connect allows users to access tailor-made solutions.

Three bar charts.

Advanced Reporting Tools

This service provides platforms and marketplaces with advanced reporting tools, ensuring full oversight of payment infrastructure. Its merchants can build custom reports, track payments, send funds to users, generate tax forms, view account statistics, and more. The Connect dashboard is an all-in-one solution for managing payment and compliance needs.

A blue shield with an orange check mark.


Stripe Connect also offers a range of security tools and features to help your business avoid fraud and reduce the chances of financial losses. There are fraud protection and management platforms designed to help identify suspicious activity. Likewise, Connect provides a range of compliance features, including tools for complying with global regulations and global licensing needs, all of which contribute to a safer platform. Connect also offers sanctions screenings, Know Your Customer (KYC) features, MATCH list checks, and more.

Understanding Integrations via Stripe Connect

Stripe Connect users benefit from a range of integration options. Fortunately, the integrations can be fairly straightforward if your business integrates with mainstream interfaces, such as well-known content management systems. However, the process can be much more complex for platforms with less recognition or that you build in-house. While SDKs are available to help with the integration process, your team will require technical experience. Connect is a very functional platform, but don’t underestimate the work it can take to create a fully custom experience for your platform and users.

Is Stripe Connect Safe?

A user leaves a good review on a stripe connect alternative.

The safety of your platform or marketplace’s payment processor and funds distributor is essential to your business, users, and customers. It has a strong emphasis on compliance. It handles the Know Your Customer (KYC) requirements and other compliance needs. Likewise, Stripe Connect payments benefit from the anti-fraud tools available in the traditional Stripe Payments platform. While there’s no doubt Stripe remains focused on providing secure payments to merchants and their customers, your business must remain wary of scammers, chargebacks, and other forms of fraud. Ultimately, your marketplace provides a safe environment for users and customers to exchange goods and services.

Benefits of Stripe Connect

Let’s explore the advantages of using Stripe Connect:

  • All-in-One Marketplace Solution: If you want an all-in-one solution to facilitating marketplace and platform transactions for users and customers, Stripe Connect has all the resources you need. While using Connect requires some technical experience, your business won’t need to build its payment processing and distribution infrastructure.
  • Outsourcing Compliance: While all merchants must remain PCI DSS compliant, Stripe Connect helps alleviate the workload by offering built-in tools and features that help automate and simplify various aspects of regulatory and compliance requirements, such as identity verification, tax reporting, and fraud prevention. This reduces the burden on your business to handle these tasks independently.
  • Strong Security Protocols: Not only do Stripe Connect’s compliance features ensure your business remains within local and international laws, but they also help provide additional security to you and your users. Whether it’s the automation of KYC services, ensuring your platform activities comply with regulations across multiple jurisdictions, or helping identify suspicious transactions, Stripe has strong security tools to protect your business.
  • Extensive Customization Options: Connect allows users to customize various features, including fund distributions. One key benefit of working with Stripe is that it provides a range of APIs and additional development resources. It’s an excellent tool if you have a team of developers ready to fine-tune your marketplace’s payment infrastructure.

Cons of Stripe Connect

Let’s explore the downsides:

  • Fees Add Up: While the platform offers a cheaper alternative to building your own marketplace distribution channels, costs still add up. In addition to Stripe’s payment processing fees, merchants must also pay routing fees, payout fees, and a range of other fees for using the platform (though these fees vary depending on the account type).
  • Technical Experience Necessary: The solution makes it simpler to build payment distribution infrastructure, but it still requires technical experience. Stripe isn’t known for its out-of-the-box tools — you need developers to get the most from its digital payment products.
  • Customer Support: While Stripe offers around-the-clock customer support to its merchants, the company is known for subpar customer interactions. Some merchants report Stripe freezes funds without warning, resulting in severe business problems with short-term cash flow issues.

Stripe Connect Alternatives

While the solution is a major marketplace and platform payment tool, it’s not the only option available. The top competitors are below:

Stax Connect

Stax Connect is another all-in-one marketplace payment system available to platforms in the United States. Stax Connect also streamlines the process of onboarding users and remaining compliant with payment regulations. Stax Connect users can entirely white label its payment infrastructure, ensuring users don’t need to interact with Stax branding when sending or receiving payments.

Marketplaces can easily migrate existing users and customers to the Stax Connect platform, making it a valuable tool for businesses with an existing platform. Additionally, while the Stax Connect platform can benefit from customization, technical expertise is not a requirement to use this payment provider (it may be easier than Connect for non-technical business owners).

Merchant Service Providers

A business may opt for a merchant service provider with payment expertise over Stripe Connect when they require comprehensive support, specialized industry knowledge, and a full suite of payment-related services. Such providers often offer tailored solutions, in-depth compliance guidance, and dedicated customer support for unique business needs, especially in regulated industries like healthcare, CBD, or finance. While Stripe Connect is versatile, businesses with complex or highly specialized requirements may find more value in a dedicated merchant service provider with deep payment industry expertise.

Concluding Thoughts: Is Stripe Connect Right for You?

More than 47% of digital purchases globally occur via online marketplaces.[3]Meteor Space. “Global Top Selling Online Marketplaces: All The Statistics You Need To Know“. Accessed April 24, 2024. If your business wants to take advantage of the opportunities afforded by marketplaces and platforms, finding a payment platform that makes it simple to accept and distribute payments is essential. With Stripe Connect, marketplaces benefit from a fully customizable payment system with custom payment distributions, strong compliance features, extensive reporting tools, and other benefits.

However, if your business requires help deciding which marketplace payment platform is best for your requirements, speak to a merchant service provider. They may provide additional services like chargeback management, customized reporting, and industry-specific expertise, which can benefit businesses with complex needs. Dealing with a merchant service provider can be preferable to using Stripe Connect for businesses seeking a more streamlined and comprehensive payment solution.

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Article Sources

  1. Insider Intelligence. “How marketplaces from Amazon, eBay, and Walmart compare“. Accessed April 24, 2024.
  2. FinMasters. “15+ Stripe Statistics for 2023: Revenue, Market Share & Users“. Accessed April 24, 2024.
  3. Meteor Space. “Global Top Selling Online Marketplaces: All The Statistics You Need To Know“. Accessed April 24, 2024.

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