Part of our POBO & COBO Solutions guide.
The Problem
A platform may collect funds for many merchants or customers into a central account. That can improve reconciliation and user experience, but it also creates questions about legal ownership of funds, licensing, safeguarding/FBO treatment, customer identification, refunds, chargebacks, and settlement.
The correct design starts with the flow of funds: who owns the funds, who owes or is owed money, who owns the external bank account, what the relationship is between the parties, and whether the underlying parties are related group companies or external customers.
Typical Flow
The diagram is intentionally generic. Actual implementation depends on the legal entities, jurisdictions, bank/provider rules, payment rails, currencies, licensing status, and reconciliation model.
Who Owns the Money?
The first question is whether the platform owns the receivable or merely receives money for merchants.
Merchant Ledgering
The account may be pooled externally while individual merchant balances are tracked internally.
Operational Controls
Refunds, disputes, negative balances, settlement timing, reserves, and insolvency treatment should be defined.
Core Design Questions
- Who is the legal account owner?
- Who is the economic owner of the funds?
- Who is the debtor and who is the ultimate debtor?
- Who is the creditor and who is the ultimate creditor?
- Are the underlying parties related companies or external customers?
- Which countries and currencies are involved?
- Which rails are required?
- What monthly volume and transaction count are expected?
- Is a named, virtual, pooled, FBO, or safeguarded account required?
- Who performs KYC/KYB, sanctions screening, and transaction monitoring?
- How will the internal ledger and reconciliation work?
What We Can Help With
We can help map the transaction, identify the appropriate banking/payment architecture, determine what type of provider is required, prepare the provider-facing flow of funds, and source or introduce suitable banks, PSPs, MSBs, or program partners where there appears to be a fit.
Frequently Asked Questions
Is marketplace collection automatically COBO?
It can be described that way operationally, but the legal structure may be acquiring, payment facilitation, money transmission, agency, or another regulated model.
Do I need an FBO account?
Potentially, especially when the platform holds money beneficially belonging to merchants or customers.
Related POBO / COBO Pages
- POBO & COBO Solutions
- What Is COBO / ROBO? Collections On Behalf Of Explained
- POBO for PSPs, MSBs, and Payment Companies
- POBO & COBO Account Structures: Named, Virtual, FBO, and Pooled Accounts
- POBO & COBO U.S. Money Transmission and Licensing Considerations
Related Services
Get Help Designing This Structure
Send us your entity chart and flow of funds. If you do not have a diagram, describe who pays, who receives, who owns each account, what the underlying obligation is, and where the money ultimately goes.