SPLIT PAYMENT DEFINITION

A split payment is when a customer divides a single transaction across two or more payment methods. For example, they might pay part of a bill with a credit card and the rest in cash. This method offers flexibility and is often used when a single payment source is insufficient to cover the full amount.

Introduction

Have you ever been to a dinner night with a group of friends and faced that awkward moment when it comes to splitting the bill? One person decides to pay the whole amount, and the other will divide the remaining amount and share it through a payment app. These are the technical shifts that are growing the popularity of split payment.

In today’s digital-first world, the way of paying bills is evolving rapidly. According to Statista , the number of users in the digital payments market is expected to exceed 8.3 billion by 2030. That’s a huge number, isn’t it?

Innovation and technology have ensured flexibility, and businesses follow the same for a balanced outcome. Split payments are one of the best payment methods that let you divide a single transaction into multiple transactions without any complex calculation.

There are multiple benefits of split payments, but do you know the concept of split payments and how it works? In this guide, we will explore every detail of split payments.

Let’s dive in.

📌 Key Takeaways

  • Split payment is a transaction method in which a total bill is divided across two or more payment sources.
  • Split payments can also refer to scenarios where multiple people jointly contribute to a single payment, or when one person uses multiple methods.
  • With split payments in use, businesses benefit from higher conversion rates and simplified vendor payouts.
  • Split payments follow robust security protocols, encryption methods, and real-time fraud checks to ensure safe payment processing.
  • Using payment processing software in your business helps you reduce financial overhead and saves time.

What is Split Payment?

Split payments are exactly what they sound like: You can split a single purchase into two or more payments. Instead of paying for something with a single credit or debit card or with cash, you can use a combination of payment methods to complete the transaction.

Suppose you’re purchasing something online for $150. You have a $50 gift card, and you want to pay the other $100 onto your debit card. You can accomplish that all in one seamless checkout process with a split payment. Or pretend you’re shopping in a store and you’d like to use some of your cash and put the rest on your credit card; that’s a split payment, too.

Split payment meaning can also refer to splitting between individuals, not just between payment methods. Consider splitting the fare for a ride between you and a friend using a rideshare app, or sharing the cost of a group vacation where everyone is asked to pay their share through a travel booking platform. It’s about accepting payments when and where they make sense.

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How Does Split Payment Work?

How Does Split Payment Work

Split payment may look easy on your device, but there is an exceptional system behind it that is designed to manage each transaction, authorization, and confirmation in real time.

Let’s find out how split payment processes work:

1. Online Split Payment Process

Splitting payments online involves dividing a total purchase amount across different payment sources during the checkout process.

Step 1: Selecting Multiple Payment Sources

At checkout, users are given the option to select different payment methods, including wallet balance, gift card, or credit/debit card. These options help the user who has multiple cards owned. Later, they can choose how the total amount can be distributed.

Step 2: Processing Sequentially

The system first checks the available balance from the user-selected method (e.g., gift card or wallet balance). If an amount remains to be paid, the user is prompted to select a second payment method, such as a credit card.

Step 3: Transaction Completion

Once all methods are processed, the entire transaction is finalized as a single purchase. The customer receives only one receipt, even though multiple payments have been made.

This setup is common on platforms like Amazon, where you might apply for a gift card and then charge the remaining balance to your saved card.

2. In-Store Split Payment Process

Split payments reach new heights when physical retail stores offer multiple payment methods, such as a split payment process at the point of sale (POS).

Informing the Cashier

The customer must inform the cashier that they want to split the payment. For example, “I will pay $60 in cash and the rest $40 with my card.” The cashier will enter the instruction into the POS system.

Input and Authorization

The POS first processes the cash and then asks for a card swipe or tap to complete the transaction. Each part of the payment is authorized securely in separate phases and finalized in a single transaction window.

One Unified Receipt

Just like online, here also the customer receives one receipt, and the system counts it as one transaction split between multiple methods.

This is frequently used in grocery stores or at restaurants when patrons want to pay partly in cash and the rest on a card, or split a bill among friends.

3. Peer-to-Peer and Group Split Payments

Split transactions are not limited to retail shops only. Apps and other platforms also support this feature, which makes it easier to manage group expenses.

Group Payment Requests

Digital split payments platforms like Venmo or Splitwise allow users to “split” a bill. Be it a dinner, a trip, or any other event, you can create shares for each person involved.

Real-Time Notifications

Each individual will be notified to pay their part. The app keeps track of every payment, i.e., who has paid and who hasn’t.

One Recipient, Multiple Contributors

The money ultimately goes to one recipient who has paid the full amount.

This method has become hugely popular in social settings and is even being adopted by ride-sharing apps and digital wallets.

Also Read:

Types of Split Payments

Types of Split Payments

Split payments come in various types, and it’s up to you to decide how you will pay. The following are 4 major types of split payments that help both consumers and businesses.

1. Split by Payment Method

It is the most commonly used payment method where the total cost is divided between two or more payment methods..

    • Example: A customer uses a $20 gift card and pays the remaining $80 by cash or credit card for a $100 purchase.
    • Where It’s Used: Retail stores, mobile apps, e-commerce websites, etc.
    • Why It Matters: When making a payment, if the same payment method doesn’t have sufficient funds, users can choose to select an alternative method, such as a card, wallet, or gift card.

2. Split by Payer (Multi-Person Payments)

Consider dividing a bill between two or more people. This is exactly where this payment type comes into use. Every individual will pay a common expense either in real time or after someone from the group makes the payment.

    • Example: Five friends go out on a trip and split the $500 bill among themselves. $100 per person will pay the amount using their own mobile payment app.
    • Where It’s Used: Group travel bookings, restaurants, ride-sharing apps, and split payment apps like Splitwise by using specialized payment processors.
    • Why It Matters: Resolves payment misunderstandings like no worry of who owes what, and simplifies group spending.

3. Split by Account or Budget Source

This type of split payment comes into play when someone wants to split a payment between two different accounts. One transaction from a personal account and one from a business account. Let’s see one example:

    • Example: A freelancer buys a laptop for work. To keep expenses clean, the transaction will be made in two parts. Personal card: $300, Business card: $700.
    • Where It’s Used: Business tools and advanced POS systems that allow split transactions.
    • Why It Matters: Very useful for tax calculations and financial tracking.

4. Scheduled or Installment-Based Splits

This type of “split transaction” usually isn’t mentioned much, but it also falls in the split payments category. It involves breaking a payment into multiple transactions over time. It is also known as the Buy Now, Pay Later (BNPL) method.

    • Example: A customer prefers to split a larger recurring invoice into smaller scheduled amounts (not through a lender).
    • Where It’s Used: Subscription platforms, invoices paid via ACH, and utility services.
    • Why It Matters: Both the buyer and the business can manage cash flow without depending on third-party service providers.

💡Pro Tip:

When offering split payments in your business, make sure your invoicing or checkout system clearly shows each contributor’s share and payment status.

Why Should You Choose Split Payments For Businesses?

Why Should You Choose Split Payments For Businesses

Split option in payments is a must-have nowadays. Whether it’s a service-based business, a SaaS platform, or an online store, it helps customers immensely. This single reason is enough to understand the worth of split payments.

Let’s take a look at the other reasons why split payments for businesses will become a necessity in the near future.

1. Boost Conversion Rates

It can be a bit tricky for traditional businesses to understand the concept of split payments. However, once you introduce split payments to your business, it will boost your sales rate as there are less chances of payment cancellation. If one payment method is not sufficient, the customer pays the rest by using another payment method (splitting the amount in two).

    • Why it matters: Split transactions, as per the customer’s convenience, have a higher success rate.
    • The best part: Split payments can be used as a value-added feature to increase Average Order Value (AOV) for businesses. Plus, customer loyalty is an added bonus for your business.

2. Simplified Vendor and Partner Payouts

For businesses that operate on a marketplace or commission-based model (e.g., ride-sharing apps, freelancing platforms, or e-commerce marketplaces), split payments make it easy to disburse revenue across multiple parties in real-time.

    • How it works: The platform collects the total amount, automatically splits the earnings, and transfers the funds to the relevant vendors, partners, or service providers, after deducting the platform fees.
    • Business impact: Automating this process makes split payments easier as administrative overhead is reduced, errors are minimized, and stakeholders have confidence that payouts are transparent and timely.

3. Integration with Payment Gateways and APIs

Implementing the split pay method is easier today thanks to advanced APIs and third-party payment gateways. Multiple payment options, along with added options like split payment, make your business stand out.

    • What to consider: Businesses need to select pain points that meet criteria related to accommodating multi-party transactions. Should offer partial payments and real-time settlement options. Also, it must be compatible with mobile, web, and POS systems.
    • Scalability: Whether you’re a small-scale or large-scale enterprise, you need a backend that is scalable and accommodates customization as your payment operations grow.

4. Better Accounting and Financial Control

By using split payments, a business is capable of tagging and tracking each part of the transaction. It makes bookkeeping simple and keeps financial reports transparent.

    • Use case: A business managing line-of-business (LOB) breakdowns or cross-charging between departments and cost centers can simplify internal tracking and audits.
    • Added value: Such clarity can only help with forecasting, compliance, and the making of financial decisions.

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Moon Invoice: A Top Invoicing Software

Split payment is simplifying the way people and businesses do transactions. It provides flexibility, increases sales, and gives financial control for every payment. From online shopping to partner payouts, this feature is becoming a necessary part of today’s tech-driven world.

If you are keen to integrate the split payments feature into your business, Moon Invoice may be the right option.

Moon Invoice is an invoicing software that helps businesses simplify their transaction cycle. From processing invoices and managing financial reports to accepting payments and creating purchase orders, it covers everything a business requires.

With real-time notifications and reporting features, businesses can monitor every transaction without manual effort. Plus, its flexible API infrastructure allows full customization based on your company’s specific payment and workflow needs.

Manage your financial operations with ease. Take a free trial of Moon Invoice Today!

FAQs

Jayanti Katariya is the founder & CEO of Moon Invoice, with over a decade of experience in developing SaaS products and the fintech industry. He holds a degree in engineering. Since 2011, Jayanti's expertise has helped thousands of businesses, from small startups to large enterprises, streamline invoicing, estimation, and accounting operations. His vision is to deliver top-tier financial solutions globally, ensuring efficient financial management for all business owners.