California-based Tipalti offers an automated mass payment system for companies to send money with a wide range of payment methods to their partners all over the world.
Tipalti specializes in international mass payments, handling complexities not always associated with domestic person-to-person or business payments. Once Tipalti’s customers provide a payee ID and the amount being transferred, Tipalti researches the country, method, payment details, status of tax form (W9) submission and performs screening for Office of Foreign Assets Control requirements.
“It’s really enabling our customers to take a wide range of payment methods, to serve their partner base and be more attractive to their partner base and leave more money in the hands of their payees,” says Chen Amit, CEO of Tipalti.
Companies offering mass pay systems are not only providing benefits for today, but setting themselves up for future success, says Adil Moussa, principal at Adil Consulting, based in Omaha, Neb.
“These companies are positioning themselves to take advantage of the general adoption of digital wallets,” Moussa says. “However that is still very far away. They are concentrated on bringing convenience to an existing small market that needs this type of solution immediately.”
Tipalti built the mass payment system after the president of InfoLinks, an online advertising network for publishers and bloggers, confronted Tipalti’s co-founder about the struggles of paying its tens of thousands of customers located all over the world in the method they accept.
Before Tipalti, Yariv Davidovich, chief operating officer and co-founder of InfoLinks, was handling payments himself. The process of paying the publishers was taking a full day and was burdened with charge backs and bounce backs.
It would take several days for the financial institutions to show a bounce back and by then the payees had already paid a fee. Payees would then complain about not receiving their money and having to pay multiple fees.
“We’re giving publishers a better service by allowing them to get paid in their own currency, and we reduced fees,” Davidovich says.
Tipalti’s customer base includes ad networks and crowdsourcing companies. These companies need to pay many people internationally at one time and can save time and money by using a mass payment system like Tipalti’s.
Moussa says companies that employ contractors, such as IT companies, freelance service providers and the companies Tipalti services can benefit from using a mass payment service instead of integrating with several different providers.
InfoLinks not only faced difficulties paying customers every month with differing payment methods but also worried about the compliance issues surrounding the payments.
For example, paper checks are impractical for its Indian customers, and in Southeast Asia customers can only be paid with prepaid cards or Western Union transfers.
“Payments methods are not a one-size-fits-all process,” Amit says.
InfoLinks first wanted a system to support PayPal and Dwolla based transfers, but determined that to be too costly an approach. Plus about one-third of the company’s wire transfers were failing because of compliance requirements, including tax withholding and other paperwork that must be filled out to provide payment.
With different payment standards for every country, InfoLinks was bogged down trying to figure out the process. Plus publishers, entering a lot of numbers, would sometimes make mistakes. Tipalti can speak with publishers in real time, explaining what numbers were missed or entered incorrectly, which has saved InfoLinks money since they started working together about a year ago, says Davidovich.
Tipalti also screens its users' payments for compliance issues.
“Regulatory issues represent a challenge for many companies,” Moussa says. “Keeping track of individual countries' laws and regulations is very expensive and necessitates a lot of programming hours, legal hours, etc. Having a company that provides this service allows other companies to specialize in what they do.”
Recently the alternative payment provider Dwolla created MassPay, a way for users to send up to 2,000 payments simultaneously. Dwolla’s product uses its standard transfer fees, with payments more than $10 costing 25 cents and any transfer less than $10 being free. PayPal also offers a mass e-payment service.
Tipalti differentiates itself by offering customers a wide range of payment methods, says Amit.
“We’re the layer on top of the payment method,” Amit adds. “We very efficiently ... provide a wide range of payment methods.”
Tipalti doesn’t choose the payment methods for its customers, which consist of about 25 users sending money to more than 100,000 payees. Instead they integrate with the client's existing payment system and provide a white label component to keep the relationship between the payer and payee. The payee tells the payer what method they prefer and then Tipalti figures out the compliance measures that need to be taken before the money can be sent.
Payees also benefit from this since transaction costs are cheaper, and they can chose different methods of payment. As an example, Tipalti can use a local bank transfer in India to save money over wire fees, Amit says.