Understanding Stripe Connect: Breaking down costs and charges

Stripe has established itself as the gold standard for online transactions – especially when it comes to online marketplaces. And that’s why marketplace platforms like markko are utilising Stripe Connect’s powerful features straight out-of-the-box, ensuring seamless transactions, enhanced user trust, and streamlined commerce for both sellers and buyers alike.

In this post, we’ll dig into the specifics of Stripe Connect, explore its implications for marketplace businesses, and delve deep into Stripe’s fee structure, giving you a thorough insight into its advantages for your marketplace.

What is Stripe?

Stripe is a digital payment processing platform that has revolutionised the way businesses can receive and send payments online. Its innovative approach to transactions, coupled with its user-friendly interfaces and robust security measures, has positioned it as a leader in the world of online payment systems. The recent valuation of Stripe at a staggering $35 billion – a testament to its efficiency, security, and popularity in the online payment landscape.

What is Stripe Connect?

Stripe Connect is a specialised payment solution developed by Stripe, explicitly designed for online marketplaces, crowdfunding platforms, and on-demand business models. It offers a suite of features tailored to these specific needs, such as:

– Technology support (identity verification, tax reporting, and multi currency)

– Mechanisms for fraud prevention

– Optimised checkout processes

– Flexibility in payment routes (one-to-one, one-to-many and escrow)

– Subscription billing capability

– Comprehensive banking infrastructure

Stripe Connect is the preferred choice for many leading online marketplaces and platforms, boasting integrations with major names like Amazon, Uber, Deliveroo, and Spotify. Its ability to handle complex payment structures, coupled with the reliability of Stripe’s core platform, makes it a powerhouse for businesses operating online marketplaces.

Integrating Stripe with online marketplaces

In order to use Stripe Connect all sellers (anyone who receives money on your platform) need to have a Stripe account. These connected accounts are created seamlessly in the background when customers onboard to your marketplace.

Markko’s integration with Stripe, specifically Stripe Connect, is a testament to the platform’s adaptability. The custom integration allows marketplaces to dictate the payment experience, rendering Stripe virtually invisible to vendors. By leveraging Stripe’s robust API, Markko ensures a customised onboarding experience for every user.

Understanding Stripe Connect charge types

Stripe Connect is designed not just for simplicity but also for versatility, accommodating a variety of marketplace models. This flexibility is evident in its three distinct charge methods, each tailored to specific transactional needs:

Direct charges

Direct charges are made directly on a connected account. This means the connected account is responsible for transaction fees, potential chargebacks, or refunds. It’s a simple model where the platform merely facilitates the transaction.

Destination charges

With destination charges, the charge is initially made on the platform’s account. After the transaction, a specified portion of the funds is then transferred to the connected account. The platform controls the funds before sending them on.

Separate charges and transfers

This involves creating a charge on the platform and then making separate transfer(s) to one or more connected accounts. It offers maximum flexibility but also requires more hands-on management.

For marketplace platforms like markko, the ‘Separate Charges & Transfers’ model has proven most effective, primarily because it facilitates multiple vendor support during a single payment flow. Yet, the flexibility remains for users to tweak their payment method, underscoring the platform’s adaptability.

Stripe Connect fees uncovered

With Stripe being a popular choice among marketplaces globally, it’s important to understand its associated costs. Gaining clarity on Stripe’s fee structure is pivotal for any business aiming to optimise their revenue streams and create a sustainable and profitable model:

You can learn more about these fees from the Stripe Connect pricing page.

Stripe processing fees

Every transaction made on your marketplace through Stripe incurs a fee, calculated as a percentage of the transaction total combined with a fixed amount. This fee fluctuates based on factors like the location of your Stripe account, the payment card’s origin, and its type. Importantly, markko takes this fee from the vendor’s transfer balance before applying any commission, ensuring vendors shoulder the Stripe processing fee.

Stripe connected account fees

Every vendor intending to receive payments on your platform must establish a connected account. This account, once active, incurs a monthly fee. The fee varies based on factors such as the account’s location and its settlement currency.

Stripe consolidates all associated fees, debiting them from your platform balance on the month’s first banking day. These fees encompass:

Active account fees

Account volume fees

Payout fees

Stripe Payout fees

Stripe enforces this fee every time funds are transferred from your Stripe account to a bank or a custom account. The fee varies depending on the country of your bank account. By default, this happens daily. If you want to change the default, you need to modify your Stripe account’s payout settings.

When are Stripe Connect fees taken?

As a marketplace operator, it’s imperative to understand the timing of Stripe’s fee deductions to better manage your platform’s cash flow and financial records.

Processing fee

Every transaction on your platform triggers the processing fee. So, every time a buyer completes a purchase or avails a service on your marketplace, Stripe will deduct its processing fee, ensuring the seamless facilitation of this transaction.

Custom accounts fee

Each vendor, once they’ve linked their bank details and started selling, establishes what Stripe terms a ‘connected account’. While these accounts facilitate smoother payouts to vendors, they come with associated fees. Stripe deducts these custom accounts fees once a month, but only for those accounts that have been active – that is, those which have successfully processed transactions in that month.

Payout fee

The culmination of every sale is the payout – the moment vendors receive their money. Each time money moves from your Stripe account to a vendor’s bank account, a payout fee is levied. This fee ensures the swift and secure transfer of funds, providing vendors timely access to their earnings.

What happens when there is no balance to pay the fees?

One such challenge that can arise is managing a shortfall in the Stripe balance, especially when refunds or chargebacks come into play. For example, a customer asks for a refund or initiates a chargeback for a transaction. This action can deplete the available funds in your Stripe account. When the Stripe balance isn’t sufficient to cover the associated fees, it will reflect as a negative balance.

The repercussions of this deficit depend largely on the location of your bank account. For marketplaces whose bank accounts are located in certain countries, Stripe will directly deduct the requisite amount from your bank to offset the negative balance. This ensures that your Stripe account is brought back to a neutral stance.

However, in other scenarios, Stripe might choose not to immediately rectify the deficit. Instead, your Stripe balance remains negative. Any subsequent payments or funds received into the Stripe account will first be directed towards neutralising this negative balance before any funds can be used or transferred elsewhere.

You can learn more about this in the Stripe support pages.

Stripe fee example

Let’s visualise a transaction scenario, where your marketplace is operating in GBP and your Stripe & bank accounts are also based in the UK.

A vendor lists a product for £100. The buyer pays with a standard European credit card, which means that the processing fee would be 1.5% + 20p. The processing fee for this transaction would be £1.70 (£100 x 1.5% + 20p), plus the Stripe payout fee (£0.30). The fund distribution would be:

Vendor: £78.64 (balance minus stripe processing fee and minus the commission)

Platform: £17.36 (commission minus the stripe payout fee)

Stripe: £2.00

A connected account fee (£2) would also be charged to the platform, but only once per active vendor per month.

Stripe Fee Calculator

For those aiming to optimise their commission structure, the Stripe fee calculator is invaluable. It lets users simulate various scenarios, revealing the ideal commission to levy on your marketplace.

We’ve built a Stripe fee calculator so you can test different scenarios to determine the minimum commission amount your marketplace should be charging.

You will need ‘make a copy’ of the Strip Fee Calculator before using it.


The intricacies of managing an online marketplace are vast, and understanding the nuances of payment processing can be pivotal for smooth operations and sustained growth. Stripe Connect emerges as a reliable partner in this journey, equipped with tools and features tailored for marketplace dynamics.

From transparent fee structures to robust handling of financial shortfalls, it ensures that both vendors and platform operators can transact with confidence and clarity.