Split and Chained Looking at Paypal Adaptive Payments

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Paypal recently released a whole heaps of new ways to use their services, I have been lucky enough to have been part of early beta testing and now no longer under those pesky NDAs can spill the beans on some of the new features.

The two big releases from Paypal have been Adaptive Payments and Adaptive Accounts, Adaptive Payments is a collection of methods of payments that changes the way you do business online (at least that’s what the marketing department at Paypal said ;) I still think they are pretty useful though) while Adaptive Accounts will allow you to generate your customers with Paypal accounts on the fly (yes you read that right) This article I’m going to focus on Adaptive Payments and in particular split payments, though fear not I will be talking about the other features over the next few weeks and months.

Split (parellel) or Chained Payments

One of the features that is going to appeal to Internet Marketers and Ecommerce developers is the Split and Chained payment feature, this allows someone to make a singular payment but the payment is split amongst several receivers this immediately opens up some amazing possibilities. With Adative payments you have:

  • A Purchaser or Buyer – the party who is buying the product
  • A Receiver – a party receiving money from the Purchase
  • An API Caller/handler – a Party which instigated the transaction and determines where funds are sent, the API caller maybe a receiver but can’t be the purchaser.

Split Payment

A singular Payment is split so the money is divided amongst one or more parties, each party is shown on the invoice, in effect while their has been one payment their are several transactions. The purchaser can see each party and interact with them, for example requesting a refund against one of the payments rather then all.

Chained Payments

A Chained Payment a singular party becomes the API Caller the purchase is made in the API caller name and the payment is then split to other parties which could include the original API caller. In this scenario the buyer only sees the API Caller in the purchase even if several transactions have occurred.

Paypal Split and Chained Payment Usage Examples

Trials and Upsells

Using Split payments a merchant can provide multiple payment cycles for different products for example:
A joint venture system using adaptive Payments
A user visits a site and purchases the online version of a product and is also offered access to a Joint Venture Partners product as part of an upsell if he agrees a split payment is made one to the original merchant and the other to the JV partner, while the user has made just one payment his invoice clearly shows two separate transactions. A problem with one of those transaction that results in a refund only effects that transaction. Allowing JV partners to have a direct financial relationship with the customer during the merchants sales person. Transactions do not have to be of the same type, while the original purchase maybe a one off payment a JV transaction might be a pre approval subscription.

Drop Shipping

Dropshipping is where a site actually does not have any stock but purchases directly from a drop shipper on purchase. When the purchase is made the dropshipper is sent the shipping details of the client and the order as well as the wholesale price of the product plus their commission. They then ship the product on behalf of the original site. With Adaptive Payments Chained payments this can be instantly automated into just 2 payments rather then just one. When the purchaser sends payment to the Merchant the merchant then generates a split payment to all drop shippers along with sales information.
Drop Shipping using Adaptive Payments
The advantage is that within Paypal every item purchased by the purchaser is passed to multiple dropshippers as one job making tracking processing a lot easier and far fewer payments.

Instant Affiliate Payments

Have a direct relationship with Affiliates you can literally split the payment, Why is this better then a monthly pay back, if their is a refund you can refund from both your Merchant account and the Affiliate account, either partially or fully! Allowing Affiliates instant access to their cash as long as they have the understanding it maybe refunded, of course you can choose to take the entire refund or indeed in part.

Is your Ecommerce system ready for Adaptive Payments?

Almost certainly not but over the next few months and years the larger e-commerce software will start to adopt this technology but by then a new breed of payment systems will be in place which can take maximum benefit. For Eccomerce systems to accept split payments they will need to create Adaptive Payments Gateway as a payment provider however to make maximum use then it will require a change in the way eccomerce systems work.

Ways current Ecommerce Systems could use Adaptive Payments?

So you want to use these right now with Zen Cart or OS commerce and similar? Well with a little work you could get something working, here is how I would implement Adaptive Payments Split Payments to notify 3rd Parties.

Headless E-commerce system with REST API

Let us assume certain products within your shopping cart require paying 3rd Parties, these are treated as regular products we just store their Product ID for future use along with who we have to pay and what call we need to make.

Assuming your Ecommerce system has flexible gateway system, building an Adaptive Payments gateway is very similar to building any Paypal based API gateway their are a couple of strange authentication changes meaning you will need to send Public Keys in Headers rather then in Post data. To generate the Payment details we would need to look at the Product IDs in the basket and check for third party products. Create a Payment button with the correct data and send the chained or Split Payment with the IPN return set to the cart, on return of the IPN request make additional calls as required to notify the third party suppliers, this is not unusual most carts have the ability to allow such calls after purchase for autoresponders. Of course this does require the third party to accept such calls and have some sort of headless Ecommerce system.

Why Headless Ecommerce Systems are the future of Ecommerce!

A headless system is one with no user interface, so no pretty web pages, rather its designed to be interacted with by web services. Think of them as listeners when data is sent to them they process the data and return if the transaction is completed. When combined with split payments these systems can be used to automate the purchase and delivery of digitial products or order of physical product without the user ever having to go to the companies own web site in effect allowing them to expand beyond their own user base. With Headless Eccomerce Systems a web site procurement program can be added directly into other peoples systems.

Examples uses for Adaptive Payments

Membership site – A headless Application manages membership to a site allowing site owners to subscribe users to the site, after payment the API generates the user with subscription appropriate to whatever was purchased. The Membership can be integrated directly into the original merchants checkout process as a cross sale.

Printing on Demand API – A headless API which accepts print on demand orders from Publishers who as part of their upsell process offer hard copies of their book, on purchase the Publisher makes a split payment with the royalties going to the Author, Printer and themselves, after payment is complete they call the Printers API to fire off the print job.

This was a quick introduction to what split and chained payments can do as well as introducing the idea of headless ecommerce systems, over the next few weeks and months I plan to show more and more of the ideas as well as more practical examples of usage.