Split Funding and Adaptive Payments

The concept of split funding has emerged due to the development of the market. Generally speaking, it can be defined as a distribution of funds to more than 3 parties (traditionally funds were distributed between a merchant, MSP, or a processor and an association). At least three scenarios can be pointed out when split funding is required. Let’s have a closer look at all of them.

The first case is when the convenience fee is used, and one or more third parties need to be paid percentages out of this convenience fee. The second case is when every transaction amount is automatically split into several parts due to the specific requirements of the business (for instance, a need to keep taxes and reserves on separate bank accounts).  The third case takes place when there is an online retailer who is reselling products of one or move vendors; consequently, he/she needs to split funds between all of them.

PayPal was the first to react to the needs of its consumers by introducing PayPal adaptive payments, which allow a PayPal user to get the payment and automatically distribute the part of the payment between the other users if he/she has such a need.

This is a very brief explanation of split funding concept and if you want to know more you can visit #Paylosophy and read the full article where you will also find the illustrative examples.