Define Funds Flow
Design how money moves between buyers, platforms, and participants throughout the transaction lifecycle.
Your funds flow determines how payments are accepted, how funds are allocated, when participants are paid, how platform fees are collected, and how transactions are reported and reconciled. A well-defined funds flow establishes the foundation for onboarding, compliance, payouts, reporting, and operational servicing.
Begin with business flow first, not APIs.
Funds Flow Design Principles
The funds flow should be defined from a business perspective before implementation begins.
When designing a funds flow, consider:
- Who initiates the transaction?
- Who accepts the payment?
- Who owns the customer relationship?
- Who receives the funds?
- When are funds available for payout?
- How are platform fees collected?
- Are reserves, holds, or adjustments required?
These decisions influence onboarding requirements, compliance obligations, allocation rules, payouts, reporting, and operational processes.
Funds Allocation
The common allocation models are as follows:
-
Single Recipient - The full transaction amount is assigned to a single recipient.
- Example: Buyer pays $100 - Seller receives $100
-
Platform Commission - The platform retains a portion of each transaction.
- Example: Buyer pays $100 - Seller receives $90 - Platform receives $10
-
Multi-Party Allocation - Funds are distributed across multiple parties according to predefined business rules.
- Example: Buyer pays $100 - Seller receives $85 - Platform receives $10 - Service Provider receives $5
Payout Strategy
Settlement and payout are related but distinct activities.
- Settlement refers to the movement of funds resulting from a payment transaction.
- Payout refers to the distribution of available funds to recipients.
Depending on the platform model, payouts may occur immediately after settlement or be delayed based on business rules, reserve requirements, or payout schedules.
Example Transaction Lifecycle
- Buyer pays $100
- Payment is processed
- Funds are allocated
- Platform retains $10 commission
- Seller balance becomes $90
- Seller becomes eligible for payout
- Payout is released according to the platform's configured payout schedule
This example demonstrates the relationship between payment acceptance, funds allocation, settlement, and payout distribution.
Funds Management
Based on when you want your participant to receive fund, you can choose:
- Immediate
- Scheduled
- On-demand
- Event-driven
Platform Monetization
How does the platform generate revenue?
- Transaction fees
- Percentage-based commissions
- Subscription fees
- Value-added services
Reporting
Platforms should determine how financial activity will be tracked, monitored, and reconciled throughout the transaction lifecycle.
Key considerations include:
- Transaction reporting
- Allocation reporting
- Fee reporting
- Participant balance visibility
- Payout reporting
- Available and pending balances
- Transaction history
- Payout history
- Reserve or hold activity
- Reconciliation requirements
Financial visibility requirements should be identified during design to ensure the appropriate participant, operational, and reporting experiences are supported.