What Are Split Payments?
Split payments are transactions where a single customer payment is automatically divided and sent to multiple recipients. For example, when a customer buys new furniture with installation included, their payment can be split - one part goes to the furniture manufacturer for the product, and another goes to the installer for their labor. This system ensures everyone gets paid instantly and correctly while keeping payouts compliant and transparent.
Why Split Payments Are Essential for Field-Service Companies
1. Legal Compliance
For companies that sell products and coordinate independent installers, the way payments are handled defines more than just cash flow - it defines their legal status.
In the U.S. (and similar markets), if a company accepts full payment from a customer and then pays installers later from its own account, it can appear to be acting as an employer. That’s a problem because in this case, the company is responsible for taxes, insurance, and benefits. Misclassification penalties can reach tens of thousands of dollars per contractor.
A split payment system prevents that risk by keeping the financial flow direct and transparent.
The customer pays once, and the system automatically divides the charge - one part goes to the company (for the product), and another goes to the installer (for the labor).
The company remains the platform or coordinator, not the financial intermediary - staying compliant while maintaining full visibility into every transaction.
2. Why Not Just Ask Customers to Pay Twice?
From a customer’s perspective, paying twice is unacceptable.
Imagine buying a $1,000 storage system:
- You pay the company online for the product.
- Then you’re told: “Please pay your installer separately on the installation day.”
That creates friction and confusion:
- The customer assumes they’ve already paid for everything.
- The installer risks showing up without getting paid.
- The company loses control of both the transaction record and the customer’s trust.
Modern customers expect one unified checkout - quick, clear, and digital.
Split payments make that possible without compromising compliance, letting both parties get paid instantly and correctly.
3. Why the Company Can’t Just Collect and Pay Later
Some companies assume they can simply collect the total amount and transfer the installer’s share later.
That approach creates a serious compliance gray area.
When the company temporarily holds the installer’s money, it effectively becomes a financial middleman. That means:
- It’s owning funds that don’t belong to it.
- It must handle withholding, insurance, and reporting obligations like payroll.
- It risks being reclassified as an employer rather than a coordination platform.
As accounting advisors like Cerini & Associates note:
Payments to 1099 contractors should flow directly from the payer to the contractor, not through company payroll or escrow, to preserve independent status.
Split payments solve this automatically.
They route money directly between customer, company, and contractor - without the company ever “touching” contractor funds.
According to Stripe, this model allows platforms to
split funds from a single transaction and route them to multiple recipients, helping businesses stay compliant while automating complex payout flows.
The result is simple but powerful:
one payment, two recipients, zero legal or accounting risk.
Which Payment Systems Support Split Payments?
When service companies look for split payment functionality, Stripe Connect is usually the first option that comes up — and for good reason.
It’s one of the most established APIs for splitting payments between multiple parties while handling all compliance, reporting, and payout logic.
Stripe also makes it easy to use the same split logic with Apple Pay, Google Pay, or ACH transfers.
However, Stripe is not the only system that supports this model. Depending on your market, pricing, and technical stack, there are several alternatives:
- Adyen MarketPay – Designed for large platforms managing contractor or vendor payouts. It handles split settlements, KYC checks, and global compliance in over 30 countries.
- PayPal for Partners – Offers adaptive payments and marketplace APIs to send money to multiple recipients within one transaction, widely recognized and accessible.
- MANGOPAY – Popular among European marketplaces and SaaS platforms; it supports escrow logic and payment splitting between multiple accounts.
- Braintree Marketplace – Owned by PayPal, Braintree provides flexible split payment structures and supports multiple payment methods under one integration.
- WePay (by JPMorgan Chase) – Used primarily by SaaS platforms to distribute payments between service providers and platform owners with built-in compliance tools.
Each of these systems has its own approach to managing risk, fees, and user verification.
Selecting one depends on your platform’s geography, the type of contractors you pay, and your compliance requirements.
If you’re evaluating these options, see Brocoders’ detailed guide:
👉 How to Choose a Payment Gateway for Your Platform
It breaks down how each provider handles transaction logic, fees, and integrations, helping you select a system that fits your business model and legal requirements.
How Split Payments in Stripe Work Technically
In platforms like Stripe Connect, this flow happens through what’s known as destination charges or separate transfers:
- Customer Checkout: The buyer pays one total amount for the combined product and service.
- Automatic Split: Stripe routes part of that payment to the company’s account and part to the installer’s connected account.
- Payouts: Stripe transfers funds directly from the installer’s account to their bank once the payment clears.
- Reconciliation: The system automatically records both transactions under one order ID, keeping accounting and reporting aligned.
This setup allows full control over split logic - companies can define how payments are divided, when payouts are triggered, and who covers processing fees.
For example, the company may choose to absorb Stripe’s transaction fee on the installer’s portion or configure different payout rules by region or product type.
Split payments also support flexible methods like Apple Pay, Google Pay, or ACH transfers because the division happens after authorization, within the Stripe flow itself.
The result is a seamless, compliant transaction where each party - company, contractor, and customer - interacts with only the part of the process that concerns them, while the system manages all the complexity behind the scenes.
You can read more about the technical implementation of Stripe split payments here:
👉 Stripe Connect Split Payments Documentation
How Split Payments Handle Refunds, Cancellations, and Real-World Scenarios
A split-payment system isn’t just a finance feature — it’s a coordination layer between customer, contractor, and company workflows.
Its design must reflect how transactions behave when plans change, refunds occur, or unexpected cases appear.
1. Checkout and Confirmation Flow
At checkout, the system presents one total price.
Behind the scenes, that total is built from two components:
- The company’s portion for the product or platform fee.
- The installer’s portion for labour.
Once the customer confirms payment, both charges are created simultaneously but managed separately.
This means if a refund or change occurs, each side can be updated independently without affecting the other.
2. Refund Scenarios
Refunds follow the same split logic:
- If the product is returned before installation, only the company’s portion is refunded.
- If an installation is cancelled after payment, the installer’s charge can be voided or refunded while the product payment remains.
Each refund action is tied to its original charge ID, ensuring full traceability in accounting systems.
Because the charges are separate, customer refunds appear as two line items — one from the company, one from the installer — preventing disputes about who owes what.
Learn more about refund logic in Stripe Connect Refunds Documentation.
3. Rescheduling or Partial Completion
When customers reschedule, the installer’s payout is paused automatically until the new appointment is marked complete.
If part of a job is completed — for example, one product installed out of two — the system can trigger a partial payout, releasing funds only for the completed item.
This protects both parties: the installer isn’t underpaid, and the customer isn’t overcharged.
See Stripe Connect Payouts for more on controlling payout timing and conditions.
4. Dispute and Adjustment Handling
If a customer files a dispute or chargeback, only the relevant charge is held — not the entire transaction.
That isolation prevents full-order freezes, keeping unaffected parties operational.
Adjustments (like correcting an installer’s fee) can be processed through an admin panel that recalculates payout logic while maintaining the same order reference, ensuring data consistency.
Read more about Stripe Dispute Management.
5. Accounting Visibility
Each transaction generates a shared invoice structure linking the company’s and installer’s charges.
From the accounting dashboard, finance teams can:
- Track payment status and payout progress.
- Manually close unpaid invoices if a job is cancelled.
- Export itemised records for reconciliation and tax reporting.
You can explore Stripe Reporting and Reconciliation for detailed insights on how these data points are managed.
Conclusion
When payments are clear, everything else in the business follows.
Customers trust what they understand, contractors appreciate transparency, and finance teams finally stop reconciling chaos.
That’s why the best split-payment systems don’t just move money - they make the entire workflow make sense.
If your checkout or payout process still feels stitched together, let’s talk.
Brocoders can help you redesign it into a seamless flow that’s compliant, intuitive, and ready to scale.