While in traditional residual revenue sharing models the merchant fees were distributed among up to three parties, such as MSPs, ISOs, resellers, modern-times merchant services market calls for more sophisticated residual revenue sharing mechanisms.
These mechanisms should provide opportunities for sharing not only merchant services commissions, but also the amount of the principle transaction, among several parties. These mechanisms should provide solutions for particular use case scenarios, such as charging.
In the first use case a third party should automatically receive some percentage of a convenience fee charged on top of a transaction amount. In the second use case, beside a convenience fee, taxes should be remitted to a designated account, while some part of the transaction amount should be withheld in reserve. In the third use case fixed percentages of the principle transaction amount should be automatically remitted to several vendors or suppliers. PayPal adaptive payments system provides a solution for the third use case.
More information on split funding and adaptive payments can be found in the respective article on Paylosophy.