After the emergence of online marketplaces and affiliate marketing the need for split funding mechanisms became extremely relevant. It became obvious that conventional model, under which the processor withheld a certain part of every transaction as payment processing fee could not accommodate more complex split payment scenarios.
As the new types of transaction participants emerged, new mechanisms had to be implemented in split funding platforms to allow each party to get the respective share of transaction amount.
Two commonly used split funding models are as follows. According to the first model, the splitting rules are defined for each single transaction separately by the submitter’s system. This model is suitable for cases when transaction details (such as the number of intermediary entities) change from one transaction to another. According to the second model, splitting rules are defined on the payment gateway’s end (in advance). This model is more suitable for cases when transaction details do not change from transaction to transaction.
More information on the role of split funding and implementation of split payment scenarios in merchant services industry can be found in the respective article on Paylosophy.