As online marketplaces have grown more complex, demand has increased for split funding capabilities. However, a number of challenges posed by split funding platforms have made many PSPs (payment service providers) wary of adding split payment processing to the merchant services they already provide.
Challengesin traditional split funding mechanisms
One of the most daunting challenges inherent in traditional split funding mechanisms deals with chargebacks and refunds. Traditionally, merchants or affiliate may experience shortages of funds that leave them unable to pay their shares of chargebacks and refunds, leaving the PSP with the immediate burden of these expenses, and the merchant and affiliate shares payable in the future. This model is known as PSP-centric.
In a merchant-centric model of split payments, all outstanding debts are returned to the PSP with each payment that comes in. Chargebacks and refunds are paid in full by the merchant, with affiliate shares payable in the future. From the perspective of the PSP, this model is far more transparent and easier to implement.
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