Application fees: how platforms make money on payments

If your platform processes payments for other businesses, application fees are how you turn that into revenue. Here's the model.

The idea

When your platform charges a customer on behalf of a connected business, you can add an application fee — your cut. The connected business gets their money minus your fee; your platform wallet gets the fee.

Two ways to set it

• A default fee on your app — set it once (e.g. 2.5%) and it applies to every on-behalf charge automatically.
• Per charge — pass application_fee_percent (e.g. 2.5) or application_fee_bps (basis points) on a specific payment. The fee is always a percentage of the charge, and a per-request value overrides the default.

An example

A customer pays ₦50,000 through your platform to a connected business, with a 2.5% application fee:

1. The processor's fee comes off first → the merchant's net.
2. Your 2.5% application fee is carved out of that net.
3. The connected business receives net minus your fee; your platform wallet receives the fee.

The fee is always capped at net, so a merchant is never over-charged.

Where it settles

The split happens at settlement (T+1 for card money). Both sides see the movement in their transaction ledger, so it's fully transparent.

Why it works

Application fees let you monetise the value you add — the checkout, the UX, the customer relationship — without asking your users to manage a separate payments contract. It's the backbone of every successful platform payments business.