PAYMENT SPLIT

Mohamed El-Zahaby V 0.1.0

February 2024
This guide is primarily for technical teams engaged in developing a payment
gateway, rather than for those using an existing one. This document is
discussing an important feature which is payment split.

Please note that we have two different terms:

- Split Payment (also split payment transaction) is the financial term for
splitting (dividing) a single and full payment in two or more simultaneous
transactions made by different payment methods and/or enabling several
individuals to contribute part of the order total jointly.

- Payment Split (also split transaction) is the process of managing payouts

to multiple accounts (stakeholders).

This document discusses the second term (Payment Split), not the first
one.

It's important to note that much of the content is compiled from various
online resources, reflecting the extensive effort in
..curating and organizing this information from numerous sources
 Contents
Contents
What is a Payment Split? .......................................................................................................................... 5
Payment Split UseCases ........................................................................................................................... 5
Things to be considered during building payment split feature................................................................ 6
Main Payment-Split Features ................................................................................................................... 8
Sample ERD ............................................................................................................................................. 9
Sample Dashboard’s Screens.................................................................................................................. 10
 What is a Payment Split?
Several online payment platforms now offer a practical feature Payment-Split to simplify
dividing funds among multiple parties. This useful function enables you to divide the cash
in your account into numerous parts, which can then be transferred directly to various
recipients, such as business associates, retailers, or suppliers.

Payment Split UseCases

• Marketplace:

• To facilitate transactions between buyers and sellers, online marketplaces

must manage financial operations, including settling the cost of goods sold
with merchants. In many cases, customers add items from multiple sellers
to their virtual shopping carts. Subsequently, payments made by customers
to the marketplace need to be divided between the marketplace itself and
the relevant sellers. Rather than handling the reconciliation process and
disbursing funds to individual sellers, the marketplace can provide a
Payment-Gateway platform with the breakdown of each seller's portion of
the transaction. The Payment-Gateway platform will then handle
settlements with all sellers and ensure that the marketplace receives its
revenue share in a designated bank account.

image copyright: https://rb.gy/vy2acy

 • Salary-Payroll:
• If you're collaborating with a group and want to cover their monthly
wages or if you're working on a freelance project with a team and wish to
divide payment among team members according to their responsibilities.

• Education institutions:
• Educational institutions collect combined fees for various purposes such as
hostels, academics, caution money, transportation, and more from students.
They require splitting these funds into several vendor/bank accounts.
Similarly, ed-tech platforms must distribute fees among numerous tutors.
Using Split Settlement, Paytm can simplify fee collection and distribution
according to merchant needs. Instead of manually reconciling and paying
vendors after Paytm has settled the funds, merchants can provide Paytm
with a breakdown of each tutor's or fee header's share in a single transaction
request. Then, Paytm will handle distributing the funds to all partners.

• Having multiple bank accounts for different purposes:

• Numerous enterprises require separate bank accounts for settlement since
customer payments are allocated to diverse aspects of the company,
necessitating precise accounting practices. The conventional method of
receiving client payments in a single account and subsequently dispersing
funds internally is not only cumbersome but also susceptible to errors.

Things to be considered during building

payment split feature
There are some considerations while planning to build the feature payment-split in your
payment gateway platform:

• Country Regulations, Money transfer regulations and laws vary by country, and it's
crucial to be aware of these differences when conducting cross-border or domestic
transactions. It's important to understand the rules and regulations related to anti-
money laundering (AML) and counter-terrorism financing (CFT) measures, as well
as any other legal requirements that may apply to international money transfers.

Some countries have strict regulations around money transfers, and failure to
comply with these regulations can result in significant fines, penalties, and even
criminal prosecution. For example, the United States has strict AML/CFT
regulations that financial institutions must follow, including reporting requirements
for certain transactions exceeding certain amounts.

In addition, some countries have restrictions on the amount of currency that can be
transferred across borders, or may require additional documentation or
authorization for certain types of transactions. It's essential to research and
 understand these regulations before initiating a money transfer, to ensure that the
transaction is compliant with all relevant laws and regulations.

• Consider different fees/cutoffs, during payments splitting, it's critical to consider

the various costs that might be removed, such as processing fees, taxes, exchange
rates when using different currencies, and other charges, to determine the final
amount received by each party. Failure to do so may result in misunderstandings,
mistakes, and possible disputes between parties regarding the allocation of monies.

It's vital to clearly grasp the charge structure and calculate the net accessible
quantities after deducting expenses to address this difficulty. This may entail
discussing with stakeholders to agree on how costs will be shared, setting clear
expectations, and employing technology solutions to automate calculations and
guarantee accuracy. Additionally, it's critical to document all payment information
and communicate openly with all parties involved to avoid confusion or
disagreements.

• Will you split the payment to your registered clients (platform accounts) only or
anyone anywhere? If you are planning to perform open transactions outside of the
platform, you have to decide which payment method / integration you will support
(mobile wallet, bank account, Paypal/Stripe/Payoneer etc., country-based transfer
platform (for example Instapay account in Egypt)). You have to calculate each
method fees carefully to deduct the fees. Also you have to keep enough
documentation about the transactions details incase of any dispute, wrong
transactions, claims from the central bank of the involved countries.)

If you are planning to transfer to your register clients, will you enforce using your
wallet (and prevent any external money transactions), to hold/keep the money as
mush as possible in your platform, or will you allow external payments.

If you are planning to allow transferring to bank accounts, how will you manage
it? Using ACH, manually, or the bank facilitate and automate online transactions?

If you are planning to use ACH, or manual sheet upload to your bank account, you
have to manage daily automatic export for transfer sheet at specific times.

• Fees and amount splitting, Will you split all the fees equally for all the parties? Or
you will let only one account to pay the fees and transfer net amounts to the rest?

The approach to fee splitting depends on the specific arrangement between the
parties involved. Here are two common options:

o Equal Fee Splitting: In this approach, all parties involved in the transaction split
the fees equally. For example, if there are three parties - Party A, Party B, and
Party C - and the total fee is EGP100, each party would pay EGP 33.33
(EGP100/3).
 o Net Transfer: In this approach, one party, usually the party that initiated the
transaction, pays the full fee, and then the remaining parties receive a net amount
after the fees have been deducted. For example, if Party A initiates a transaction
with Party B and Party C, Party A pays the full fee of EGP 100, and then Party
B and Party C receive a net amount of EGP 66.67 each (EGP 100 – EGP 33.33).

Main Payment-Split Features

- Add new accounts with financial details.

- Add new payee with financial details.

- Add bulk payees with financial details.

- Manual split configuration:

o Create split group.
o Add payees.
o Set split percentage or split fixed amount.
o Fees percentage or fixed amount.

- Automatic/schedule split:
o User can select a periodical payout (for example weekly monthly) to a specific
group with a specific amount.
o User can set an automatic payout for a specific group once the available
balance at her/his wallet reaches a specified threshold.

- Automatic export and send by email for ACH sheets.

- Handle online transaction queuing on failure. (with audit trail).

- Audit/log for each transaction.

- The payment-gateway-platform administration will set the payout time for each user
(T+1) (T+2) etc.
Sample ERD
 Sample Dashboard’s Screens

Source: https://support.paystack.com/hc/en-us/articles/360009881460-How-do-I-split-a-payment-across-multiple-
bank-accounts
Source: https://business.paytm.com/docs/split-settlement/