Why would platforms hold responsibility for negative balances?

Why would platforms hold responsibility for negative balances?

• A. Using custom or express connected accounts
• B. The platform never holds liability
• C. The account is standard
• D. If the refund was issued

Answer: (A)

When a connected account ends up with a negative balance, who bears the loss depends on how the connected account is set up. With custom or express connected accounts, the platform has more control over funds and payout timing, effectively acting as the merchant of record. This means the platform may be liable to cover any shortfall to keep payouts and obligations satisfied. In contrast, standard connected accounts rely more on Stripe to handle funds and risk, so the platform isn’t typically responsible for negative balances. So, platforms would hold responsibility for negative balances when using custom or express connected accounts.

When a connected account ends up with a negative balance, who bears the loss depends on how the connected account is set up. With custom or express connected accounts, the platform has more control over funds and payout timing, effectively acting as the merchant of record. This means the platform may be liable to cover any shortfall to keep payouts and obligations satisfied. In contrast, standard connected accounts rely more on Stripe to handle funds and risk, so the platform isn’t typically responsible for negative balances. So, platforms would hold responsibility for negative balances when using custom or express connected accounts.