How a global gig economy adds complexity to payments tech
International sourcing is stressing businesses that are already too reliant on paper-based payment methods, argues Hyperwallet's Tomas Likar.
"When you look at domestic transactions, that's fairly easy and you have a bunch of options to choose from," said Likar, vice president of strategy and business development at Hyperwallet, which serves companies in the sharing or "gig" economy.
Such companies include freelancers, contractors and app-based workers such as Uber and Lyft drivers. The San Francisco-based mass payout company has traditionally focused on North American payers, but has recently opened offices in London and Sydney, with plans to shortly add an Asian office, to address what Likar said are expanding needs for international mass payments. Hyperwallet has clients that have expanded into as many as 30 new markets in the past year, Likar said.
The sharing economy is complex enough in one market, but international sourcing adds new challenges. "Once you get into country three or four or five, you have to open a new a bank account in each. It can get complicated," Likar said.
Even in a domestic market such as the U.S., which has the ACH system for fast electronic transfers, about half of businesses use paper methods such as checks to pay suppliers. There is no true interoperable digital payment system that connects all countries, making mass payouts more complex.
The rapid growth of the sharing economy means that many more people are starting to look like merchants, said Zil Bareisis, a senior analyst at Celent.
This means individuals may now require services to handle collections, payments, and sales support, he said. "Many of these transactions know no borders. A freelance photographer may have his or her photo picked up by a foreign publication, or a translator might be providing services to a company abroad."
"International payments provided by banks are usually too expensive," Bareisis said. "As a result, such individuals and the companies that pay them often rely on new a new type of specialist cross-border payments provider."
Tipalti, which manages tax compliance and processing, recently received an investment round to expand to new markets. And payments API provider Stripe is collaborating with Visa and Mastercard to provide payments within the same day. Payoneer has also been building partnerships to serve an increasingly international supplier payment market for the sharing economy. Green Dot and Uber have added faster processing for contract and freelance workers at the ridesharing service through a collaboration.
Faster payments can add another complication as payees will demand payment in shorter intervals than the traditional two-week payroll period.
"The ability to reach as many individuals as possible through their preferred payment method is key, whether this is a checking account, a prepaid card, a mobile solution, etc.," said Sarah Grotta, director of the debit advisory service at Mercator. "Faster payment solutions that offer the ability to pay quickly and frequently is becoming more important."
Hyperwallet has partnerships with more than four dozen geographically dispersed banks to offer a payment network for independent contractors, freelancers and other suppliers, with the scale of the network supporting cost cuts. The network support multi-currency accounts for payees, branded Visa and Mastercard prepaid cards, and the ability to collect payee information from within the business' existing platform.
"With local banks, for example you can support a cash pickup and prepaid cards that allow people to receive funds and shop right away," Likar said.
Companies like Hyperwallet and Tipalti also offer compliance services, which can be complex for multi-currency payments that have a payor and payee in different countries.
"Every country will have unique payment networks and payment rules," said Tim Sloane, vice president of payments innovation at Mercator.
"They are also likely to have different requirements of what constitutes employment and for how the employer is to report earnings and manage taxes," Sloane said. "That in turn will make the employer look at solutions that support this range of issues."