Etsy has announced they will be lowering the percentage of funds on hold for the majority of sellers and making adjustments to tracking requirements - is this a sincere effort to "keep commerce human" or simply a last ditch effort to escape payment reserve scrutiny ahead of Q2 2023 earnings report?
Payment reserve holds have become an escalating point of concern for sellers with many threads in the Etsy community forum and across social media pointing to increasing cash flow risks for businesses on the platform.
For example, just this one post has over 200 replies and it is far from the only recent one on this topic.
With the increasing attention and complaints, Etsy has been forced to address the issue and has posted additional details about how payment reserves work in the community.
In light of the recent increase in questions we’re seeing about how payment reserves work, we wanted to share more details about why this is an important safeguard for our community. We take our responsibility to ensure that Etsy is a trusted and safe place to shop and sell very seriously. That’s why we have payment account reserves, which help protect the marketplace for everyone.
What’s a reserve?
When a reserve is active on a seller’s payment account, a percentage of a seller's earnings on each physical order they receive will not become available for deposit for a period of time. This helps to confirm that the seller is able to keep up with customer demand by shipping on time and providing reliable and trusted customer service. Funds in reserve are released for deposit once the order is shipped and in transit (confirmed through tracking events from your postal carrier). In fact, on average in 2022, funds from most orders became available to sellers within 2 weeks of the order date.*
*Based on an internal analysis of orders in reserve during 2022.
Why might my funds be placed in reserve?
Temporary payment account reserves may be placed on accounts based on different risk factors, such as:
- A sudden sharp increase in orders
- Orders are consistently missing tracking information or tracking events
- Orders are not shipped on time
- A recent increase in refunds
- If they are a new shop to the marketplace
Our Etsy Payments Policy lists some of the different risk factors we use to determine if an account reserve is triggered. Reserves can be placed or removed from a payment account at any time, and a shop could have a reserve placed on their account more than once if they continue to meet risk criteria. A payment account reserve is placed on a seller’s account due to a combination of factors, so it’s unlikely that a reserve would be placed due to only one change or risk criteria. We do not share the specific logic or thresholds we use to determine if a reserve is placed on a seller’s account to strengthen our protection against fraudulent account activity.
What to do if you’re placed in reserve
Check your email. If you have a reserve put on your payment account, we’ll send you an email that outlines those details of how long and what portion of your funds will be unavailable for deposit. You’ll also be able to find this information in your payment account.
Here are a few things you can do to reduce the chances of a payment account reserve being placed on your shop:
- Add tracking that Etsy can confirm when you can. This will allow any held funds to be released as soon as the order ships.
- Ship your orders on time. If you find yourself continuously unable to meet those timelines, adjust processing times accordingly.
- Only mark your orders as complete after they've been handed to the shipping carrier.
- Respond to any messages from customers quickly—within 24 hours if you can. This is key to receiving Star Seller status, and Star Sellers are exempt from payment account reserves.
- Stay up to date on seller policies to ensure your shop is remaining in compliance.
You can learn more about payment account reserves in Etsy’s Help Center.
But as Cindy points out, this is not an exhaustive list and as long as Etsy continues not to be transparent about all of the risk factors they look at, any seller could be at risk at any time.
Have you experienced a recent Etsy account payment reserve? Let us know about your experience in the comments below!