As technology evolves, the commercial landscape is quickly changing from a physical to a digital realm. Advancements in financial technology (or fintech) have made it easier for businesses to cater to each customer’s individual preferences and needs.
As such, paying for products and services is now possible in real-time and rather inexpensively. Innovations like digital split payments provide greater convenience for customers, allowing them to pay however they want, which also improves the customer experience.
ISVs and SaaS companies that offer payment processing through their software must, therefore, think about implementing such features that will enhance the user experience and provide greater value. In this article, we’ll take a closer look at split payments including their benefits, and discuss how you can easily implement them on your software platform.
Let’s get started.
TL;DR
- A transaction that involves using multiple payment methods to pay for a single purchase or a bill being split between two or more users is a split payment. Another type of split payment is where you divide the cost of an item into a fixed number of installments—usually interest-free—to be paid at a later date.
- Split payments allow consumers to avoid negative impacts on their cash flow, pay over time, utilize interest-free offers, and split expenses with other contributors. They also help merchants reduce friction at checkout, boost incremental sales, reduce cart abandonment, get repeat purchases, increase conversions and average order values, and boost customer loyalty.
- Unfortunately, implementing split payments in your software isn’t straightforward, but working with the right payment partner can drastically reduce the complexity. Stax Connect has the capabilities to help your end users pay for a transaction using multiple payment methods or split a bill easily.
Join the Payments-Led Growth Movement
Sign up to keep up-to-date with the latest trends in payments, vertical SaaS, and technology from industry experts.
What Are Split Payments?
In its simplest form, a transaction that involves using multiple payment methods to pay for a single purchase is called a split payment. For example, a customer may want to pay for a single transaction using a combination of any of the following forms of payment: credit card, debit card, vouchers, store credit, rewards, gift cards, digital wallets (like PayPal, Venmo, or Apple Pay), cash, etc.
A person using two or three different credit cards to pay at checkout or a bill being split between two or more users also counts as a split payment. Many banks and financial institutions offer such functionality by allowing their customers to request payments from people they split a bill with (known as sub-payees).
There’s also another type of split payment (sometimes called deferred or partial payment) that has become quite popular in recent years. This is where you divide the cost of an item into a fixed number of installments—usually interest-free—to be paid at a later date. Here’s how it works:
- At checkout, a merchant gives the customer the option to pay for their purchase in three or four installments.
- The merchant’s bank or lender pays for the purchase in full, upfront.
- The customer immediately pays the first installment at the point of sale (POS).
- The customer pays the remaining balance in weekly, bi-monthly, or monthly payments depending on the agreement between the customer and the merchant.
Most customers appreciate the flexibility that these “Buy Now, Pay Later” (BNPL) schemes offer. In fact, 32% of shoppers who choose this payment option do so because they prefer to pay over time—even if they have the money—so they can avoid any negative impact on their cash flow or budget.
Key Benefits of Split Payments
Split payments are beneficial for consumers, businesses, as well as for merchants. Consumers have the freedom to split a shared household or restaurant bill with others or buy something expensive without putting a huge strain on their finances. In sum, split payments allow them to:
- avoid any negative impact on their cash flow
- pay over time
- utilize interest-free offers
- split expenses with other contributors
Split payments are particularly beneficial for businesses when they have to deal with multiple sellers or vendors. For example, global eCommerce marketplaces like Amazon deal with thousands of sellers. Split payments make it possible for them to pay up all sellers in the correct amounts when a customer purchases products from different sellers in a single order.
As for merchants, split payments offer a host of benefits. The payment flexibility brings in incremental revenue which may otherwise have been delayed or lost completely. It also:
- reduces friction at checkout
- accelerates repeat purchases
- boosts customer loyalty
- increases conversions and average order value
How to Implement Split Payments on Your Software
While split payments may offer tons of benefits for users, unfortunately, implementing this feature in your software isn’t exactly straightforward. There are quite a few things you must consider. For example;
- Verification. In the case of credit card payments, if a customer uses more than one card to split a payment, they will need to be verified using an address verification service (AVS) to make sure that the billing addresses match with the issuers.
- Refunds. With multiple payment methods, refunds are a bit more complicated as they will need to be sent to the same payment method that was used while buying. Such customers may need greater support to help them navigate the process.
- Integration. By enabling split payments, you will need to support a wide range of payment methods. Not only will this require integrating with multiple providers, but also make compliance more complex.
The good news is that the right payment partner can take care of all these considerations for you. Stax Connect has the capabilities to help your end users pay for a transaction using multiple payment methods or split a bill easily. Sub-merchants will be able to accept partial or split payments against an invoice easily.
The Stax API is capable of supporting a wide range of payment methods including credit and debit cards, ACH processing, digital wallets, and so on. Plus, we are PCI-compliant which mitigates risk for your business as well as your users. In addition, our support team comprises real payment experts, so you and your sub-merchants can benefit from our various levels of support.
Contact us today for a consultation and learn how Stax Connect can help you implement a complete payments ecosystem with minimal investment of time and money.
Quick FAQs about Split Payments
Q: What are split payments in fintech?
Split payments in fintech refer to the ability to divide a transaction into multiple payment methods or between different users. This can include using a combination of credit cards, digital wallets, or installment plans to complete a single purchase. This flexibility is a significant advancement in financial technology, enhancing consumer convenience and financial management.
Q: What are the main benefits of split payments for consumers?
Split payments offer consumers several benefits, including the ability to manage cash flow more effectively, take advantage of interest-free installment plans, and share expenses with others easily. This payment method allows consumers to make larger purchases without financial strain, boosting their purchasing power and satisfaction.
Q: How do split payments improve the customer experience?
Split payments improve the customer experience by offering payment flexibility and reducing friction at checkout. This leads to higher customer satisfaction, as consumers can choose the payment method that best suits their needs, avoid budget constraints, and enjoy a smoother transaction process.
Q: Why should businesses consider implementing split payments?
Businesses should consider implementing split payments to increase sales, reduce cart abandonment, and improve customer loyalty. By offering flexible payment options, businesses can attract more customers, encourage repeat purchases, and increase their average order value.
Q: How can split payments benefit merchants?
For merchants, split payments reduce checkout friction, enhance customer loyalty, and boost conversion rates. By accommodating various payment preferences, merchants can cater to a broader audience and facilitate smoother transactions, ultimately leading to increased revenue.
Q: What challenges might businesses face when implementing split payments in their software?
Implementing split payments can be complex due to the need for integration with multiple payment providers, ensuring compliance with financial regulations, and managing refunds across different payment methods. These challenges require careful planning and potentially partnering with specialized payment processors.
Q: What role does a payment partner play in implementing split payments?
A payment partner can simplify the implementation of split payments by providing the necessary infrastructure, ensuring compliance, and offering support for a wide range of payment methods. This partnership can reduce the complexity and risk involved in adopting split payment solutions.
Q: How can split payments be integrated into existing software platforms?
Integrating split payments into existing software platforms typically involves using APIs provided by payment partners. These APIs enable businesses to support multiple payment methods within their checkout processes, allowing for seamless and secure transactions.
Q: What is the impact of split payments on customer loyalty?
Offering split payments can significantly enhance customer loyalty by providing a more flexible and user-friendly payment experience. Customers who feel their payment needs are being met are more likely to return for future purchases, thus strengthening their relationship with the brand.
