What are split payments and how can they benefit marketplace businesses?

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May 17, 2023
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What are split payments and how can they benefit marketplace businesses?

In essence, the marketplaces and payfacs of the ecommerce world aren’t radically different from their real-world forebears.

A consumer enters an environment containing multiple sellers offering a variety of products. They might buy a shirt, a phone case, and a table lamp in one trip. But here’s where the off-and-online worlds depart. In a street market, the consumer would pay for each item separately at the individual seller’s stall. In an online marketplace or payfac, the consumer will add items from multiple sellers into their basket and purchase them in a single transaction.

So how do marketplace businesses and payfacs ensure they distribute the correct proportion of fees and funds to every party involved in the transaction? That’s where split payments come in.

Learn more: What is a payfac?

What are split payments?

In the world of payment processing, the term split payments is used in multiple contexts. Payments can be split into installments and between multiple sellers.

The marketplace can do this automatically, ensuring sellers receive a fair proportion of any multi-seller purchase on the platform, minus fees, without requiring any further involvement from the sellers and no need for them to be involved in the transaction.

Checkout.com’s Integrated Platforms solution enables merchants to automatically split a single payment amount between multiple sellers at either the authorization, incremental authorization, capture or partial capture stage of the transaction.

In each stage:

  • Authorization: You need to split a payment between multiple sellers at the payment authorization stage. Example: A customer purchases five items from three different sellers on a reseller platform. Funds are routed to each seller account at the authorization stage.
  • Incremental authorization: You need to split a payment between multiple sellers at the incremental authorization stage. Example: A traveler books a hotel through an online travel agency for one night, and then extends their stay to two nights. The amount and validity period of their payment authorization is increased.
  • Payment capture stage: You need to split a payment between multiple sellers at the payment capture stage. Example: A passenger authorizes a payment to book a car ride on-demand. The end cost is divided in platform and seller account. Similar to above but without increment.
  • Partial capture stage: You need to split a payment between multiple sellers at the partial capture stage. Example: A customer purchases new office furniture online, but the order will arrive in stages. The desk is shipped the same day and the chair is shipped in three days time. The corresponding payments are made in the moment of sending each of the products.

Benefits of split payments for marketplaces and payfacs

We’ve seen how it works, but what are the benefits to marketplace businesses of offering split payments:

  • Limits human error - splitting payments is automated, which significantly reduces the chances of any errors being made in comparison to manual reconciliation, and ensures a fair distribution of payments to each seller and the platform
  • Builds trust and loyalty - this quick, fair and automated process gives sellers satisfaction with quick receipt of their funds and a clear breakdown, leading to long-lasting and productive relationships. What’s more, transparent fee structures allow sellers to see the exact proportion of each transaction that’s spent on fees
  • Automate funds flow - automating everyday tasks like splits, fees, and transfers is a great way to keep your money within the platform.
  • Highly scalable - automated split payments is a highly scalable solution, ensuring that, no matter how many sellers you onboard and how complex the scenario, you can easily split and distribute funds. It also means you can conduct business at any time and there is no lag from timezones or opening hours for processing payments.

Makes payment processing simple - automated splitting is highly efficient, reducing work and helping to save you time and resources that can be better spent elsewhere

Learn more: A guide to marketplace payments

Checkout.com can help you use split payments

At Checkout.com, we know your marketplace or payfac needs a scalable way to have full control of the flow of funds between sellers and your platform as your business grows.

That’s why we offer automated split payments commissions, and balance transfers as part of our Integrated Platforms solution.

We empower marketplaces with granular data that sets your sellers up for success and gives full visibility of every transaction, platform revenue, cost, and growth opportunity.

Learn more about how to implement split payments with Checkout.com and contact our sales team or discover more about Integrated Platforms.

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May 17, 2023 5:37
May 17, 2023 5:47