Allocation Models
Allocation Models determine how transaction proceeds are distributed among parties within the platform ecosystem.
Different platforms have different fund distribution requirements. Some platforms calculate allocations for each transaction individually, while others rely on predefined rules or manage allocation calculations outside of the fund allocation system.
Fund Management supports multiple allocation models to help platforms align fund distribution with their business rules, participant relationships, operational requirements, and revenue-sharing arrangements.
The available allocation models include:
- Transaction-Level Allocation Instructions
- Summary-Level Allocation Instructions
- Rule-Based Fund Allocation
The appropriate model depends on where allocation decisions are made, how frequently distribution logic changes, and the level of control the platform requires over fund allocation outcomes.
Transaction-Level Allocation Instructions
Transaction-Level Allocation Instructions allow the platform to provide allocation details at the time a transaction is submitted. The platform determines how the transaction proceeds should be split for that specific transaction and passes the allocation instruction as part of the transaction flow.
This model is best suited for platforms that require dynamic, transaction-specific fund distribution where the allocation amount may vary based on the order, participants, commercial agreement, or transaction context.
Key Characteristics
- Allocation details are provided with each transaction.
- Supports exact split amounts or participant-specific allocation instructions.
- Allows the platform to control fund distribution at the transaction level.
- Reduces dependency on static pricing schedules or predefined fee configurations.
- Supports custom or variable payout arrangements across participants.
Common Use Cases
- Multi-Party Order Distribution - A single customer payment may need to be distributed across multiple parties involved in fulfilling the order
- Custom Commercial Agreements - A platform may have unique commercial terms with specific participants, requiring different fund distribution logic for certain transactions.
- Transaction-Specific Partner Payouts - Allocation amounts may change based on the transaction type, order details, participant role, or platform-defined business logic.
Split Rules and Destinations
- Allocation instructions must be included in the Authorization or Capture request. - Each transaction requiring custom fund distribution must provide allocation details at the transaction level, identifying the intended allocation destinations and amounts.
- Allocation amounts must balance to the full transaction value. - The combined total of all allocation destinations must equal 100% of the transaction amount. Transactions with over-allocated or under-allocated funds will be rejected.
- Each allocation destination must be valid and eligible to receive funds. - All referenced allocation destinations must be configured within the platform and authorized to participate in transaction-level fund allocation processing.
Summary-Level Allocation Instructions
Summary-Level Allocation Instructions allow the platform to manage allocation logic internally and submit summarized allocation outcomes rather than providing detailed allocation instructions for each transaction.
The platform determines how funds should be distributed based on its own business rules, participant relationships, and commercial agreements, while maintaining allocation logic outside of the fund allocation system.
This model is best suited for platforms that require flexible and dynamic fund distribution without relying on predefined allocation rules, pricing schedules, or externally managed configuration.
Key Characteristics
- Does not require allocation rules, pricing schedules, or distribution configurations to be maintained within the fund allocation system.
- Reduces the need to submit detailed allocation instructions with every transaction.
- Allows allocation logic to be fully managed and controlled within the platform's own systems and business processes.
- Provides flexibility to support changing commercial arrangements without configuration updates.
Common Use Cases
- Platform-Managed Revenue Distribution - The platform calculates how transaction proceeds should be distributed based on its own business logic and submits the final allocation result.
- Dynamic Commercial Agreements - Fund distribution may vary by participant, customer, order type, or business relationship, making centralized platform-driven calculations preferable.
- Multi-Party Ecosystem Management - The platform manages participant relationships and allocation calculations internally while maintaining flexibility to change distribution models over time.
Split Rules and Destinations
- The platform is responsible for determining allocation amounts. - The fund allocation system does not calculate distributions or apply predefined allocation rules. All allocation outcomes are determined by the platform.
- Allocation amounts must balance to the distributable transaction value. - The total allocation amount submitted by the platform must not exceed the amount available for distribution. Allocation requests that exceed the distributable value may be rejected.
- Each allocation destination must be valid and eligible to receive funds. - All referenced parties must be onboarded, configured, and authorized to participate in the platform's fund distribution model.
Rule-Based Fund Allocation
Rule-Based Fund Allocation allows the platform to configure allocation rules that are automatically applied to eligible transactions.
Instead of passing allocation instructions, the platform defines rules in advance, and those rules determine how funds are distributed.
This model is best suited for platforms with repeatable, consistent allocation patterns, such as standard commissions, revenue-sharing arrangements, or reserve requirements.
Key Characteristics
- Allocation rules are configured in advance.
- Rules are automatically applied to eligible transactions.
- Supports percentage-based or fixed-amount allocation models.
- Helps standardize fund distribution across participants or programs.
- Reduces operational effort for recurring allocation scenarios.
Common Use Cases
- Platform Commission - A platform and third parties automatically retain a percentage or fixed amount from each transaction before distributing the remaining funds to the merchant/participant.
- Standard Revenue Sharing - A platform distributes transaction proceeds based on predefined revenue-sharing rules between participants.
- Reserve Allocation - A portion of transaction proceeds is automatically allocated to a reserve balance based on platform-defined rules.
Split Rules and Destinations
- Allocation rules must be configured before transaction processing. - Rule-based allocations are determined using predefined allocation logic established within the platform and applied automatically during transaction processing.
- Allocation rules must produce a fully balanced distribution. - The resulting allocation generated by the rule must account for 100% of the transaction amount, ensuring all funds are assigned to designated destinations without variance.
- Rule evaluation must be based on defined transaction attributes. - Allocation rules may use transaction data such as merchant, product, service type, channel, location, or other configured criteria to determine the appropriate fund distribution outcome.