Split Funding Models

Online payment transactions have become increasingly complicated, with online affiliates, multiple suppliers, and other entities seeking a share of the pie. Until relatively recently, payment processors simply withheld a processing fee and send the remainder of each transaction to the merchant. Now, transaction funds frequently need to be divided among multiple accounts. Split funding is the mechanism that allows this to happen.

There are two methods of handling split payments, and it is important for companies to choose a split funding mechanism that can handle not only current needs, but potential future needs, as well.

Custom Split Funding

With this method, the split for each transaction is determined separately, with fund distribution rules specifying with merchants, affiliates, or other entities get specific percentages of the money. This method is most effective when transaction context determines the split, such as when multiple affiliates are involved or when the number of items purchased determines the split.

When a customer makes a purchase from a website that uses affiliates to generate traffic, the right split payment platform will split the funds between the site, the affiliate, and any other entity that claims a share of the sale.

Gateway Defined Distribution

A more complicated way of managing split payments occurs at the gateway level and involves predefined distribution rules. An example of this is rental payments. When the payment is made, a convenience fee is withheld for the processor, and the remainder deposited with the landlord.

Another example is a website that sells items for multiple suppliers. When an item is sold, the split funding mechanism detects the supplier of the item and sends the funds, less the store’s markup and any other fees, to that supplier. When an item is sold for another supplier, the funds minus fees will be sent to that supplier. Each supplier may have a different amount withheld, but each transaction follows similar rules.

Other Factors to Consider

With split funding, it’s important to know which party pays transaction fees. Most of the time, the fees will be paid entirely by one party, but it’s a good idea to choose a split funding platform that can handle any needs that may arise.

Split payments become even more complicated in the case of voided and refunded transactions. In most of these transactions, no one gets their money, but in other cases, only a portion of the transaction is refunded, such as when a convenience fee is refunded.

Split funding platforms are not all created equal, and some may be unable to handle all of your current and future business needs. We recommend the UniPay gateway developed by United Thinkers. UniPay is a powerful payment gateway capable of managing all types of payment situations, including split payments, easily.

At PayVisors, we are dedicated to helping you find the merchant services you need to run your business successfully. You can also visit #PayVisors website to learn more about payment processing.