The Rise of Split Payments

In an era of shared living and collaborative experiences, splitting payments has become paramount. This is especially the case given the increased cost of living, which drives the need for new generations to budget efficiently and tackle financial challenges. Whether it's dining out with friends, planning a group excursion, or managing co-living expenses such as rent, utilities and groceries, the need to divide costs fairly, transparently and efficiently has become more important than ever.

Have you ever gone out to dinner with a group of friends and dreaded the time when the bill came, and you each had to calculate your share? What’s worse, even after going through all that hassle, have you ever had a sum of money that’s still unaccounted for and uncomfortably looked at each other wondering who’s going to cover that? With more and more split payment solutions on the market, these once cumbersome tasks have been streamlined, making financial interactions amongst groups seamless and hassle-free. No longer do we need to worry about awkward discussions or numerous calculations and re-calculations. With the click of a button, split payment solutions handle the division of expenses, allowing everyone to focus on enjoying the experience rather than fretting over financial logistics.

Several players are driving innovation and shaping how split payments are delivered to consumers. Traditional financial institutions, such as banks, are incorporating split payment features into their mobile banking apps, empowering customers to divide expenses seamlessly. These features include joint accounts, expense categorisation and sharing, person-to-person (P2P) payment splitting functionalities, or direct integrations with other payment splitting solutions, such as Splitwise or Zelle.

NatWest, for example, provides a feature called "Split the Bill / PayMe" within their mobile banking app, whereby users can split bills and request payments from their contacts by entering the amount and selecting the recipients. Users can generate a payment link or a QR code and share it with their contacts, who will then be able to make the payment directly from the Mobile banking app of their UK bank account.  

Challenger Banks such as Starling Bank, Monzo and Revolut integrate with Splitwise, which is an app that allows users to create groups and record shared expenses within those groups. When it's time to settle the debts, Splitwise calculates the balances owed by each individual and provides clear settlement instructions, allowing users to settle payments through various methods, such as cash, bank transfers, or other payment apps.

Fintech start-ups are also making waves in this space, offering dedicated split payment apps with advanced features like automated expense tracking, multi-currency support, and real-time balance updates. A year ago, a group of 30 European restaurant owners and tech experts created Sunday, an app that allows customers to download menus and pay for their portion of the order by scanning the QR code on their table. In countries such as the UK and France, where restaurants add discretionary service charges, the app also automatically includes in the fair share associated with the user’s order, reducing the hassle considerably.

The software also simplifies the payment process for the restaurant, as it can also integrate directly with the existing cash register. Rather than paying monthly subscription fees or setup fees, restaurants are charged pay processing fees based on usage.

Digital wallets, such as Venmo, PayPal, or Zelle, also offer the ability to split payments among multiple individuals. All the user needs to do is insert the total amount to be paid, as well as the participants involved in the split, by selecting friends from the contact list or link with social media accounts for easy identification. The app would then calculate the share of each participant based on an even split or customisable percentages, and then send a payment request to each participant. Users can also have flexibility over the payment options they can go for. They can choose to use a card on file, enter the card details for a new card, or link a bank account for direct transfers.

PayPal also offers a convenient way to split payments between multiple parties. When making a purchase or sending money through PayPal, users have the option to split the payment with others. They can specify the amount each party should pay, and PayPal handles the transaction accordingly. The payment option, called “Split it with PayPal” is also offered directly on the website of some travel merchants, such as Airbnb or merchants that sell tickets, such as Vue, the multinational cinema company.

The future of split payments will be fuelled by advancements in technology, shifting consumer behaviours and a wide variety of use cases. Firstly, as the hospitality industry rebounds from the pandemic's impact, enticing customers back to restaurants, trips, and hotels has become a top priority. This is particularly relevant for Gen Z customers, who are tech-savvy and deeply interconnected. By offering the convenience and financial flexibility of split payments, businesses can not only encourage Gen Z to partake in more experiences but also cater to their preferences in managing expenses. Secondly, as digital payment methods continue to evolve, split payment solutions will become more sophisticated, with enhanced personalisation and user interface, as well as more integrated with other financial tools. Finally, the rise of open banking initiatives and increased collaboration among financial players will likely lead to more seamless and interconnected split payment experiences.

With important financial players driving innovation and an exciting future ahead, split payments are here to stay. In our increasingly interconnected world, consumers can now embrace the power of splitting expenses and enjoy hassle-free financial interactions.

At EDC we can support financial players that want to innovate in this space. Moreover, our retail practice is dedicated towards helping merchants choose the right payment acceptance strategy for their customers to maximise revenues and reduce cost.

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The content of this article does not reflect the official opinion of Edgar, Dunn & Company. The information and views expressed in this publication belong solely to the author(s).