What is split payment and how it works

In this article, we will try to explain in a simple and clear manner what split payment is and how it works, analysing the Cuborio CMS and how it can be used to help companies save money.

Split payment and reverse charge are two different tax systems that can be used by companies when dealing with transactions.

Both systems are used to reduce the amount of tax that companies have to pay in certain situations.

Cuborio was designed, from the outset, to create multi-vendor ecommerce like Amazon and eBay, and therefore having a website that can handle the split payment tax system is crucial.

What is the purpose of split payment in an ecommerce?

Let's make a premise straight away: Cuborio is not an invoicing software, but thanks to the integration of APIs in an ecommerce, it is able to automate many marketing and workflow processes.

The split payment system in ecommerce

Rationalising orders, sending payments to users (buyers, sellers, administrators) or managing refunds: managing payments in a multivendor ecommerce marketplace can be a complicated process.

There are several complexities to deal with, such as handling sales tax, guaranteeing products sold, managing split payments in real time, and more. Moreover, the payment process becomes more complex when buyers and sellers are located abroad.

However, the growing popularity of digital payments has made it essential to have an embedded payment system in an eCommerce marketplace, as the total value of transactions in the digital payments segment is expected to reach USD 13.91 billion by 2026.

For this reason, it is imperative to have a pre-integrated payment gateway that automates payments and controls the flow of funds.

However, using key resources and energy to build a payment gateway from scratch is not the best solution, especially for multi-vendor e-commerce owners. This is due to higher development/maintenance costs and time-consuming integrations with payment processors.

This is why it is recommended to opt for a third-party payment gateway for all online marketplace payments.

A multi-vendor online marketplace involves hundreds or perhaps thousands of transactions per minute. Amazon, for example, recorded an impressive $10,000 in sales per second in the first quarter of 2020. Now, imagine the Amazon team manually sending payments for each transaction involved. That would be utter chaos.

Fortunately, there are many third-party payment methods and resources to automate transactions and Cuborio integrates all the best ones. This automation facilitates payments globally because payment solutions automate the payment process by offering a controlled flow of funds with individual gateway APIs that can be integrated with e-commerce marketplaces to facilitate payments automatically.

How split payment works

Split payment is secure and provides instant split payments by charging a fixed percentage of money per transaction.

It primarily requires each user to have an account on an individual payment gateway (called a linked account) for transactions in a marketplace.

Users can create a new account or add an existing account to the marketplace during registration.

When orders are placed simultaneously using the accounts, the Split Payment API instantly splits the amount of the order charged between the sellers and the administrator.

These payments flow into specific Stripe accounts and the records are maintained in the administrator/seller panel.

How are refunds/returns handled with spit payments?

Refund/return requests can also be handled through your account. For example, when a refund request is initiated by the buyer and approved by the administrator/seller, the funds will automatically be credited to the credit/debit card initially debited. In the event that the linked account and platform balance are negative or insufficient, the refund status will be set to pending.

When funds are available, the Split Payment API automatically processes the refund, changing the status to 'successful'.

How Cuborio's Split Payment makes your business grow internationally

The Split Payment API follows dynamic checks, real-time screening and other commands to approve new users. It also offers instant onboarding for companies and individuals already using the same payment method.

• Secure - The payment method is authorised globally, is PCI DSS Level 1 compliant and uses account tracking technology with instant deactivation to prevent fraudulent users.
• Accepts payments internationally - Facilitates the seamless flow of funds between users and the marketplace, even across borders. Accepts more than 135 currencies globally, ensuring a truly scalable business.
• Smart Pay ments - Collects commissions, schedules payments and automatically transfers funds from buyer to seller instantly. Payments made from Connect eliminate the need to manually track and transfer funds.

The split payment system is a great way for companies to grow their turnover internationally.

This system is particularly beneficial for companies that sell to customers in other countries, as it can help them avoid paying a higher tax rate on their goods.

How to issue a split invoice?

Issuing a split payment invoice is relatively straightforward, but thanks to Cuborio the whole process is automated because, when creating the invoice, the seller will have to indicate that the payment is to be handled by a special procedure.

Once this is done, the buyer will be able to make a single payment that will automatically be split into two parts:

• The first part of the payment will be made to the buyer.
• The second part of the payment will be made

Click on the link opposite to find out in detail how the split payment system works in Cuborio ecommerce.