Horizontal payment processors have served software platforms for years but lack flexibility critical to certain key verticals. Enter split funding and dynamic funds routing. In this blog, we’ll explore how split funding and dynamic funds routing transform payment processing for software platforms serving key “Need to Pay” verticals like Property Management. From flexibility to facilitating complex payment management, we’ll uncover the benefits and their impact on digital commerce.
Understanding Split Funding and Dynamic Funds Routing
- What is Split Funding and Dynamic Funds Routing? This is the process in which a software platform that is processing payments can split a transaction and have it deposited into multiple merchant accounts or on their behalf.
Split Funding and Dynamic Funds Routing: Benefits for Software Platforms
When it comes to split funding and dynamic funds routing, there are multiple benefits software platforms will see when working with the right payment provider.
Never co-mingle funds again. With split funding and dynamic funds routing your software platform can avoid the co-mingling of funds. Co-mingling of funds typically refers to the mixing or pooling of funds from multiple transactions or sources into a single account but also consolidating different funds sourced for different purposes. For certain verticals, this provides superior user experiences while remaining compliant, while the co-mingling of funds is highly discouraged.
By eliminating the co-mingling of funds, your platform will avoid:
- Accounting Challenges: WIth traditional payment processing providers, all your transactions occur within a basic merchant account and among daily batches of transactions. This means that funds get routed to one or two bank accounts with limited control over how they get settled, inadvertently mixing funds from different sources. This makes it difficult to track individual transactions or understand the origin of specific settlements within your clients’ bank accounts.
- Compliance Headaches: Depending on the jurisdiction and industry, there may be regulations or legal requirements governing the segregation of funds, particularly when handling transactions on behalf of others (e.g., customers or clients).
- Lack of Transparency: Maintaining records of all your transactions from your customers coupled with keeping track of funding transfers, payments to your software companies, and other bills in bank accounts places an undue burden on businesses. This can be a nightmare operationally and may even require you to leverage third-party tools to just make sense of it all.
Additionally, split funding and dynamic funds routing allow software businesses to optimize for:
- Improved customer experience: ensuring timely and accurate payments, increasing customer experience within your platform as it relates to payments, and the splitting of funds overall.
- Increased compliance and transparency: facilitating adherence to financial and compliance regulations and providing clear records for auditing.
- Ease of payment management: simplifying reconciliation and reporting, eliminating the need to track individual transactions across multiple accounts. Working with the right payment provider offers a streamlined approach that not only saves time and resources for software platforms but also improves accuracy and transparency, enhancing the platform’s financial visibility and control of all transaction details in one centralized view.
Which SaaS Industries Can Benefit From Split Funding and Dynamic Funds Routing?
Certain SaaS industries significantly benefit from utilizing split funding, specifically to eliminate the co-mingling of funds. One key industry is the HOA software industry. For example, if you are operating as an HOA software company, you are responsible for all of the individual HOA management companies under you, who are responsible for collecting all of their homeowner payments and fees. When the HOA management companies under your platform receive payments from the homeowners, they need to ensure there is no co-mingling of funds that eventually flow through as transactions via your platform. For example, a homeowner may pay an HOA management company under your platform for renting out the pool area at their building but also pay a fee for re-paving the roads at the HOA community. If both of those transactions settle into the same pool, this would be considered a co-mingling of funds. Co-mingling funds in HOA software platforms is highly discouraged to ensure financial transparency, comply with legal requirements, and prevent fraud. Keeping funds separate simplifies accurate accounting, reporting, and auditing while reducing liability and maintaining homeowner trust.
Streamlining Payment Management & The Power of Working with the Right Payment Provider
Payabli empowers software platforms to optimize their payment processing, drive revenue, and boost customer satisfaction with a unique payment feature set that is fully integrated and baked into each platform’s product experience. Unlike many payment providers in the space, Payabli offers robust split funding capabilities, setting up each customer on your platform with the appropriate amount of merchant accounts and ensuring the correct funds routing to eliminate the co-mingling of funds. This allows you to process transactions securely and compliantly, routing funds to different bank accounts while seamlessly reconciling split funding through comprehensive transaction and settlement reporting APIs and UIs. Our team provides the tools to direct and split funds according to your unique business needs, ensuring compliance and enhancing user experience.
To see how these innovations can revolutionize your software platform’s payment processing, we invite you to watch our video on split funding and dynamic funds routing.
Interested in learning more? Schedule some time to chat with one of our payment experts. We’ll show you how our API-first payment solution can empower your business to build seamless payment experiences.