🌐 How to Keep your Marketplace Fraud Safe and Compliant

Issue #2, October 10, 2023

Author

Sahil from Dots
October 10, 2023

Welcome back to the Payouts Club! 💸

Payouts Club is a bi-weekly newsletter about everything payout-related featuring guides, written content, interviews with founders, case studies, and collective thoughts from fintech leaders and creators.

Each week we’ll cover the most relevant topics from for anyone who works with payouts on the daily which includes:

  • Companies paying out contractors like freelancers and gig workers

  • Contracted freelancers, creatives, gig workers

Here’s this week’s edition:

🌐 How to Keep your Marketplace Fraud Safe and Compliant

AI-related fraud is on the rise with instances of voice deep fake scams being a trending topic on social media this past week.

For marketplaces, online fraud is a major factor that can make or break your business. Especially as we’re in the Decoupled Era of payments, low fraud incidence and security is a key factor in setting your marketplace apart from others.

And with the new INFORM Act being passed December 29, 2022 that include specific data security requirements for sensitive customer information, fraud protection and security compliance is no longer a choice, but a must.

In today’s newsletter, we’ll explore:

📊 Top privacy and security measures to implement for online marketplaces

🗒️ What the INFORM Act is and what it means for marketplace businesses

✅ How to stay compliant working with 1099 contractors

💸 The advantages of using an API for more secure marketplaces

📚 Gentle Guides:

If you’ve paid out a seller on your marketplace $600 or more, the seller, who is considered a 1099 worker, needs to fill out a W-9. You may also need a copy of the contractor’s business license, if applicable.

This new act passed on December 29, 2022 applies to online marketplaces. It’s enforced by the Federal Trade Commission and can have significant fees for non-compliance. In summary, marketplaces are required to collect, verify, and make available seller information to consumers. The compliance deadline has passed so make sure you are staying compliant and updated every year.

  • Seller name

  • Email address

  • Phone number

  • Tax Identification Number

  • Banking Account Information*

💡 Pro tip: Banking information can also be collected by a payment API or other third party contracted by the online marketplace. Working with a secure, fraud-protected, and compliant API can be an easier and more secure way to collect sensitive information.

Payout APIs can automate tax reporting and compliance for businesses that work with international workers, making it even simple for companies to work with and pay freelancers on time.

Implementing ID verification checks prior to onboarding means you can catch fraudsters before they even enter your platform.

Know Your Customer and Know Your Business regulations are similar, but different. Many marketplaces use APIs to effectively manage the entire verification process.

🔎 Fresh Finds: Global Contractors Edition

Our weekly pick for the best posts, articles, and other content from the community about working with international contractors.

Listen to this podcast episode by Marketplace Morning Report about the nuances of the INFORM Act on your commute to work.

🎟️ Upcoming Events about Marketplaces & Safety:

💬 Talks & Tweets:

Don’t forget the 10-day deadline to submit your information!

Automated bots were a key player in the $27.9M figure. Don’t let bots overrun your market.

Using another marketplace to power your marketplace is a smart move. Check out our previous post for a list of top freelancer marketplaces.

The answer to almost everything.

💡 Bonus: Top 3 Security Companies For Marketplaces to Partner With:

  1. Persona - ID Verification

  2. Checkr - Background Checks

  3. Middesk - Know Your Business (KYB)

TL;DR: Fraud and noncompliance is on the rise for digital marketplaces, but we’ve got your back on best practices. The INFORM Act compliance deadline was earlier this year, and we’ve provided guides like What is the INFORM Consumer Act to help make sure you avoid costly fees.

That’s all folks.

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