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How Cashflow is transformed by Split Payments

 

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?

 

Understanding split payments

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 invoice 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 making 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 method as well as 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 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 settlement of funds. A 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 routing the payments from customers at different location to the concerned merchants.

 

Aggregators

Sharing platforms like Uber are able to send payment from multiple travellers to a driver, thanks to split payments. More than one person might be travelling in a cab but 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 platform 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.

 

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 becomes a feature that enterprises cannot do without. It helps businesses and individuals keep at bay cash flow problems, which may even threaten closure of operations.

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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Abhinav Paliwal

Abhinav Paliwal

CEO

PayNet Systems

Member since

08 Jun 2021

Location

India

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This post is from a series of posts in the group:

Payments strategies 2015-2020-2030

Payments systems visions, strategies, trends, pilots, forecasting, and planning for the short-, medium-, and far-term.


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