[pwim]

Is the main focus of your site transferring money between users? If not, why not just use paypal or some other 3rd party service? If it is, you are opening a whole can of worms with regards to the legality of your service. You should consult a lawyer about it, but I'm guessing you won't be able to come up with a cheap solution to the problem.

[grasshoper]

It's a marketplace, not a money-transferring service or anything like that. Thanks for reminding me to clarify that.

Paypal is definitely very easy to set up, but I keep hearing stories of accounts getting frozen. If I do opt to use it to hold the earnings of sellers, and that account got frozen, it could be disastrous. The second way would be far less risky because it would just be the site's cut frozen, but splitting up payments doesn't seem to flow well with Paypal (maybe I'm wrong about this?).

[imp]

Having your PayPal account frozen is only a problem if you don't move your money OUT of PayPal after you receive it. If you regularly transfer money into your company checking account, then you won't have any real problems. In the worst case if PayPal freezes your account then you can still mail people checks. Keeping your money in PayPal is kind of dumb anyways, since it doesn't earn interest. I've been using PayPal for two years without any problems.

[Aaronontheweb]

You're always going to be at the mercy of a third party with any e-commerce system unless you happen to be a major financial institution.