What is a Retained Amount for ISVs?
Service fees for software have come a long way. Software developers continue to evolve and change the way they charge their merchants. For instance, some developers may find it helpful to avoid charging a monthly or yearly one-time fee for their software services, keeping a portion of each transaction instead. Moreover, some would prefer to hold a convenience fee or withhold a donation, but don’t currently have a way to separate the charges from merchants’ transactions. Fortunately, this is where a Retained Amount feature can help.
How Retained Amounts Work
Sometimes called split funding, a Retained Amount withholds a percentage of a merchant’s deposit. The funds are then distributed into two or more bank accounts, which enables ISVs to better segment costs and deduct fees.
For example, let’s say a merchant receives $100 from a transaction. The ISV’s processing fee is 2%, and they want to reserve an additional 2% from each transaction to cover the cost of the software. That would mean $2 would be used for the processing fee and $2 would be sent to the ISV’s account automatically. In many cases, the ISV has a specific reserved account for these fees and is paid a residual.
Organizations often leverage this option to refine their payment processing workflow and reduce manual transactions.
Use Cases for Retained Amounts
There are a few different ways merchants and ISVs can use the Retained Amount feature, some of which are creative. Outside of general fees, you can use it for:
- Convenience fees
- Affiliate rewards
- Allowing end-consumers to split a bill
Despite the many use cases, there are a few drawbacks. Refunds, chargebacks, or determining who pays what fee can be challenging to organize. For that reason, it’s critical to map out a clear vision for the entire payment process and communicate it to both the internal team and end-users.
The Fortis Difference
As a leading embedded payments solution, Fortis offers a simple way to streamline Retained Amounts for ISVs and merchants. Our award-winning APIs, sandbox tools, quick onboarding, chargeback management, and enhanced workflows enable you to rapidly customize your payment processes.
To learn more about Retained Amounts and how you can optimize your payments, speak with our experts today.