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How does PayPal for Marketplaces handle orders and refunds?

Important: PayPal for Marketplaces is a limited-release solution at this time. It is available to select partners for approved use cases. For more information, reach out to your PayPal account manager or contact a PayPal Partner Expert.

Order and refund processing depends on whether a marketplace has a Connected path or a Managed path integration to PayPal.

Here's how orders are processed:
  • Connected path marketplace – After PayPal processes the customer's payment and the parketplace partner authorizes the disbursement of funds, PayPal performs risk and compliance checks on the transaction and releases the funds to the merchant's payPal account. The merchant then transfers the funds to their bank or debit card.
  • Managed path marketplace – After PayPal processes the customer's payment and the marketplace partner authorizes the disbursement of funds, those funds move from the partner's PayPal account to the merchant's bank or PayPal account. PayPal then disburses the funds to the merchant's bank.

Similarly, when a transaction must be refunded, the money flow varies with the type of marketplace:
  • Connected path marketplace – Either the partner or a merchant can initiate a refund. PayPal reverses the transaction, including funds settled to the merchant and the partner fee. We also reverse the variable portion of our processing fee and charge any fixed fees or other overages to the merchant's account. If funds can't be recovered from the merchant account, PayPal absorbs the loss.
  • Managed path marketplace – Either the partner or a merchant can initiate a refund. Because the partner owns loss liability for a Managed marketplace, the partner has a loss account to facilitate reverse movement of funds. PayPal reverses the transaction form the partner's loss account, and also reverses the variable portion of our processing fee. We charge fixed fees or other overages to the loss account.
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