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Home » Blog » ISV Guide to Split Funding for Merchants

ISV Guide to Split Funding for Merchants

  • May 22, 2025

Introduction

Merchants today need faster, easier access to capital to keep their businesses running and growing. Managing cash flow can be challenging, especially when businesses face fluctuating revenue and rising expenses. As a result, many business owners are exploring more flexible funding methods that align with their daily operations. One such solution is split funding.

Independent Software Vendors (ISVs) are in a unique position to help deliver this solution. By integrating split funding into their platforms, ISVs can enable merchant clients to automate fee deductions through credit card transactions. This guide explains what split funding is, why it matters for merchants, the benefits for ISVs, and how MSG Payment Systems can help streamline implementation.

What Is Credit Card Split Funding and How Does It Work?

Split funding, also known as split payouts or split disbursement, enables a merchant’s daily deposit to be automatically divided between their primary account and one or more additional recipients. This is especially useful for:

  • Recouping credit card processing fees
  • Collecting platform/technology fees
  • Routing franchise royalties
  • Simplifying reconciliation in regulated industries

Examples of Split Funding in Action:

  • Insurance companies: Due to regulatory constraints, they can only record premiums, not additional fees, on their books. Split funding allows them to pass credit card fees to the customer while automatically directing that portion to the service provider. For example, on a $102 transaction, $100 goes to the insurer and $2 routes to the processor automatically.

  • Franchises: Franchisors can automatically collect royalties from franchisee sales at the time of settlement, removing the need for invoicing or monthly reconciliation.

  • ISV platforms: If an ISV charges a per transaction fee for using their software, that fee can be deducted and routed directly during the transaction, with the remainder sent to the merchant.

All of this is calculated and executed at the time of settlement, meaning no manual transfers, invoices, or reconciliation are required later.

Why Split Funding Matters for Merchants

Credit card split funding helps merchants simplify operations and improve predictability.

Key benefits include:

  • Automated, predictable deductions: Whether it’s for paying franchise royalties, platform usage fees, or routing funds to service providers, merchants can set it and forget it.

  • Streamlined reconciliation: Funds are automatically routed, reducing bookkeeping errors and manual payment headaches.

  • Improved cash flow management: Merchants know exactly what’s being deducted and when, enabling better financial planning.

Key Benefits of Split Funding for ISVs

Split funding isn’t just helpful for merchants; it delivers real business advantages for ISVs too:

  • Flexible monetization: Some ISVs use split funding to automate collection of platform fees or value-added services. It simplifies billing and ensures consistent revenue capture.

  • Increased stickiness: Providing split funding capabilities makes your platform more essential to merchants’ daily operations.

  • No heavy lifting: Partnering with a provider like MSG means all the complexity—from logic to compliance to settlement routing—is handled for you. Implementation is lightweight, and your dev team doesn’t have to build everything from scratch.

How MSG Powers Split Funding

Implementing a split funding program might sound complex, but MSG Payment Systems makes it straightforward:

  • Easy integration: MSG offers flexible integration options to incorporate split funding into your software. Whether using low-code/no-code tools, modern APIs, or existing payment gateways, implementation is efficient and developer-friendly.

  • All-in-one solution: MSG handles both payment processing and split funding logic, so everything works together seamlessly. You don’t have to coordinate across multiple vendors or systems.

  • Fast funding & automated deductions: MSG’s infrastructure allows for quick merchant funding and precise split routing with every transaction—no extra steps required.

  • Transparent reporting: ISVs and merchants gain clear visibility into performance metrics through MSG’s Partner Portal, including insights on processing volume and funding distribution.

  • Dedicated support: MSG provides expert support at every step—from setup to long-term optimization—to ensure your merchants receive maximum value from split funding capabilities.

Conclusion

Split funding is a modern, efficient way to handle revenue distribution, whether your merchants need streamlined franchise royalty management or automated platform fee collection, split funding offers a seamless solution.

For ISVs, it’s a strategic opportunity to increase value, boost retention, and expand revenue opportunities—without adding complexity.

MSG Payment Systems makes it simple to implement and support. Contact us to learn how we can help you bring split funding to your software and empower merchants to grow with confidence.

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