Split payments involve dividing a customer's transaction into multiple parts, enabling payment from various sources like bank transfers, card payments, and digital wallets. Offering split payments in your business grants flexibility and convenience, allowing customers to divide expenses or use multiple payment methods simultaneously. Remember that implementing this feature requires integration with specialized payment processors or gateways. By diversifying payment options, businesses enhance user experience, boost conversion rates, and foster customer loyalty.
Customers have more options than ever at checkout between payment apps, electronic transfers, and BNPL services. Some prefer to break down the total bill into various methods or split payments. So, what is split payment, and how does this type of payment method work? Here’s a closer look at your options.
Split payment meaning: what is a split payment?
When a customer uses more than one payment method to settle a single transaction, this is called a split payment. For example, a customer might put the total cost of their transaction on two different credit cards.
Single customers don’t always use split payments. A group might ask to split the bill for a product or service they purchased together, like a meal at a restaurant or a shared utility bill. Businesses can use split payments as well by asking to split the cost of vendor invoices across more than one payment method.
Although they’re sometimes used interchangeably, split payments are different from deferred payments.
Deferred payments
Deferred payments also split the total cost into smaller portions, spread out into installments and paid off over time. Buy Now Pay Later services like Klarna are an example of this type of deferred payment.
GoCardless offers a seamless solution to facilitate deferred payments using ACH (Automated Clearing House). By leveraging GoCardless’s robust payment infrastructure, merchants can set up recurring ACH payments for a set number of cycles, creating a fixed-term installment plan. Businesses can increase conversion rates with a fully customizable checkout flow embedded directly into their website. These can be localized for over 30 countries, enabling a smoother payment flow from across the globe.
What are the main uses of split payments?
With the rise in peer-to-peer payment apps like Venmo and Zelle, it’s perhaps no surprise that many American consumers are splitting the bill with friends. According to a Forbes study, nearly half, or 47%, of U.S. adults use these apps to split payments with friends and family to pay for meals, groceries, and other expenditures.
In addition to splitting the bill at a restaurant with friends, individual consumers use split payments in brick-and-mortar retail locations. For example, they might purchase groceries and split payments into a combination of cash and credit cards. Some e-commerce stores are following suit by offering a choice of different payment methods at checkout. For online shoppers, this most frequently includes the option to split payment between a gift card or voucher and a credit or debit card.
What are common split payment methods?
Here’s a breakdown of the various split payment methods you can offer at checkout:
Gift cards
Vouchers
Credit or debit cards
Store reward cards
Checks
Cash
This is in addition to the peer-to-peer payment apps mentioned above, which facilitate digital split payments. Some company-specific apps enable split payments, including Uber and Lyft. These allow users on the same ride to split the bill automatically with multiple payment methods during an active ride.
What are the benefits of providing split payment options?
If you’re a small business owner, why should you consider offering split payments to your customers? There are plenty of benefits. It’s generally always a good idea to provide your customers with the widest possible range of payment methods. Catering to customer preferences at checkout helps push through sales that might otherwise be abandoned. It also caters to customers who have a strict spending limit on their debit or credit cards, enabling them to make larger purchases.
Offering split payments:
Reduces shopping cart abandonment
Offers a better customer experience
Increases conversion rates
Improves customer loyalty and satisfaction
How to split payment during a transaction
If you’re thinking of offering split payments, there are a few factors to take into consideration. The first step is to choose a payment gateway that enables split payment methods. This should include a blend of digital wallets, bank transfers, vouchers, reward cards, and card networks. If your current payment provider only accepts card payments, you’ll need to branch out into multiple providers to cater to a wider range of options.
Another factor to consider is card verification and security. When your customer uses multiple cards simultaneously, both must be verified with the issuer. Look for a provider that can handle multi-card verification at speed.
Case Study: Diaper Stork
Diaper Stork, an eco-conscious diaper service and baby boutique in Seattle found a solution to lower overhead costs and improve payment efficiency by transitioning from credit cards to GoCardless Direct Debit bank payments.
Reducing waste is a really important part of our future, and given that disposable diapers are the third single largest item in landfill, it would make a big dent if we could reduce that.
Carrie further highlighted the benefits of using GoCardless and ACH debit payments:
Paying with a low-cost method like ACH debit really makes a big difference for small businesses. It allows us to reduce costs, and, as a result, more money stays in the local economy.
Sarah Coonley, head of customer service at Diaper Stork, emphasized the convenience for customers, explaining:
Our customer base all have young babies at home, so they're really busy. They’re not interested in doing something that takes a lot of time or effort, especially if it happens every month. With GoCardless, parents have one less thing to worry about.
As for the integration with Xero, Carrie expressed her satisfaction:
As a small business owner, I wear a lot of hats. Anything that frees up time for me to focus on higher-level strategy rather than transactional tasks is a huge help.
Looking toward the future, Carrie believes GoCardless, with its low cost and seamless integration, is ideal for their subscription-based business. She looks forward to the continued benefits it will bring to Diaper Stork, its employees, and its customers.
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Setting up payment collection is fast and efficient with GoCardless. By automating the payment collection process, GoCardless drastically cuts down the administrative responsibilities of managing and tracking invoices for your team.
GoCardless makes it quick and easy to get started with no contracts or long-term commitment required. You can set up recurring payments in the merchant dashboard in just a few clicks. GoCardless automatically creates and sends all the necessary forms, doing all the heavy lifting for you. You can also connect to GoCardless via over 350 partner apps, such as Xero and Salesforce.
Discover how GoCardless can automate payment collection, making it easier for you to concentrate on what matters most – your business growth.
FAQ: Split Payments
What companies allow split payments?
Many companies offer split payment options to accommodate customer preferences and enhance flexibility in transactions. Some notable providers include leading payment processors like PayPal, Stripe, Square, and Klarna, as well as specific industry-focused platforms such as Splitit for retail and Afterpay for e-commerce.
These companies enable businesses to implement split payments, allowing customers to divide their transaction amounts and make payments using various methods like bank transfers, card payments, or digital wallets. By leveraging these services, companies can offer enhanced payment options and provide a seamless and convenient experience for their customers.
Can PayPal do split payments?
Yes, PayPal does offer split payment options, allowing businesses and individuals to divide transactions into multiple parts. PayPal's "PayPal.Me" feature and its Adaptive Payments API enable users to split payments among various recipients.
By leveraging PayPal's split payment capabilities, businesses can provide customers with flexibility in their payment methods, facilitating transactions that involve multiple parties or the division of expenses. It is important for businesses to familiarize themselves with PayPal's specific terms and conditions regarding split payments to ensure a seamless payment experience for their customers.
Does Amazon split payments?
Currently, Amazon does not offer a built-in split payment option for purchases. However, customers can leverage other payment methods to split payments on Amazon. For example, they can use a combination of Amazon gift cards, store credit, and various payment cards to cover different portions of the transaction amount. Additionally, third-party services like Splitit and Klarna can be used in conjunction with Amazon to split payments into installments. These methods allow customers to divide their payments for purchases on Amazon, providing flexibility and convenience.
Is it smart to split payments?
Splitting payments can be a smart strategy for both customers and businesses in certain situations. It allows customers to manage their expenses more effectively by dividing large transactions into smaller, more manageable portions. This can help with budgeting and financial planning. For businesses, offering split payment options can enhance customer satisfaction, flexibility, and convenience, which can lead to increased sales and customer loyalty.
However, it's important for both parties to consider any associated fees or interest charges, as well as their individual financial circ*mstances, before deciding to split payments. Evaluating factors such as convenience, affordability, and personal preferences can help determine if splitting payments is a smart choice in specific scenarios.
