Understanding Split Payments

Updated: May 6


Handling cash flows 💸 has always been key to businesses’ survival. However, walking the path with numerous customers, partners, merchants, and vendors every single day of a year is challenging. Often, on an invoice, there could be multiple sub-payees, which makes it so complex for your workforce.


Could split payments be the answer?



Did you ever feel the need to split an invoice into two or more people? You can probably do that with some calculation once or twice a day if you are running a coffee shop or restaurant, but things become harder and more complex when you are running a larger business, needing to do the splitting of invoices day in and day out.


At any time, a business is dealing with so many hassles dealing with multiple vendors, sellers, or merchants at any given time. Doing it manually is always going to be a painful exercise for the business.


The term ‘Split Payments’ indicates the process of having multiple payment destinations for a single collection inflow. Before the business makes a settlement for the invoice, the payment for these destinations is collated and reconciled in an automated manner.


Split payments allow a business to:


· Provide stakeholders real-time payment visibility

· Prevent settlement delays for sub-payees concerned with an invoice

· Manage commission settlements with ease

· Reroute money flow more efficiently

· Automate your daily operations




Functioning of a split payment


Split payment allows customers to choose the method as well as the manner of their payment. The example of marketplace business will help understand it better. There are multiple sellers on the marketplace and a customer might place orders from multiple sellers. Though the user rolls out the payment in full via a single transaction, the marketplace will use the split payments methodology to settle the funds to the accounts of different sellers, who go on to process the order and dispatch the ordered stuff.


In this use case, split payment helps the marketplace business owner ensure the satisfaction of both customers and merchants. In case the marketplace and the merchants have an agreement regarding the splitting of commission, it can be accommodated during the settlement of funds.


The banking as a service (BaaS) platform has the mechanism to track these transactions and reconcile them.


Use cases


In a string of business use cases, split payments come across as the perfect fit for cash flow management and reconciliations.


Digital marketplaces

Ever wondered how Amazon or Flipkart support multiple sellers? Split payment is one of such technologies that make it happen under the hood. This is achieved by routing the payments from customers at different locations to the concerned merchants.


Aggregators

Sharing platforms like Uber are able to send payments from multiple travelers to a driver, thanks to split payments. More than one person might be traveling in a cab but the system can send all relevant payments to the driver.

Gig platforms

Platforms like Upwork connect people looking for work with companies in search of trained people for short-term projects. Aiming to bridge two sectors of demand and service, gig platforms benefit big time from split payments, settling funds from the hirers to workers.


Multi-branch retail outlets

Fast food outlets such as McDonalds have multiple branches. To be precise, many of these chains might be having thousands of outlets worldwide and managing the flow of money seamlessly across these is far from easy. Split payments facilitate tracking of every single order.


Ed-tech platforms

For an ed-tech platform, transferring the payments from each student to the respective tutors for the chosen set of courses is far from being easy. Split payments make the distribution of payments simple for ed-tech platforms. Ask Unacademy or Coursera.



How can PayNet assist your business


Businesses, regardless of their size, struggle with payments, particularly when it has to be settled with multiple merchants. Payment APIs are efficient in instant money transfers, but when it comes to commission settlements, split payments become a feature that enterprises cannot do without.


It helps businesses and individuals keep at bay cash flow problems, which may even threaten the closure of operations.


We have the technical sophistication to handle the complexities involved in the entire flow of split payments. Simplification of payment happens at three levels – tech, business, and legal.


Robust APIs are a key requirement for handling as many transactions as on a marketplace. PayNet rolls out well-tested APIs that can process millions of hits per month with 99.9% uptime and 30% faster response time.


The processing could come to a halt for a number of reasons – downtime, volume spikes, or unforeseen events. To steer clear of such a scenario, PayNet has put in place a multi-bank architecture, facilitating instant switching if there is a hindrance.


The legal aspect is something no business can afford to ignore as it costs them tons of unnecessary resources. To comply with regulations, PayNet routes transactions through nodal and escrow accounts.


Wrapping up


Financial integration is resource-guzzling, particularly when it comes to stuff like commission settlement. It might take up months at stretch and take up plenty of capital to implement such stuff. Leveraging expertise in split payments, our team completes the integration with greater efficiency and lesser costs.


All split payments solutions come together with automated reconciliation, else the process will become a bumpy ride.


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