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Global sharing economy and on-demand businesses face complex challenges, including how to pay service providers (drivers, hosts, tasks doers, etc.) from all over the world, with different regulations, currencies, and payment methods.
Tipalti is a software as a service solution that simplifies managing and paying these partners. Shareable connected with Chen Amit, cofounder and CEO of Tipalti, to learn more about the sharing economy from his unique perspective and how Tipalti solves a key problem for sharing economy marketplaces.
Shareable: For sharing economy companies, creating a rich, online marketplace can be a daunting task. What are some of the biggest challenges to building and supporting such a marketplace with 1099 contractors, freelancers and other suppliers?
Chen Amit: Firstly, the nature of the challenges definitely depend on the market and maturity of the sharing economy company. At the earliest stage, getting the word out and recruiting your marketplace suppliers is critical. To attract the right quality and quantity of suppliers, you also need to show them that you have enough demand (or potential demand) for their services and that they will be compensated attractively.
So in the early days, it can be particularly challenging for on-demand and sharing economy companies to build service demand while building a quality network of suppliers to serve that demand. In particular, if you get enough demand but your suppliers cannot fulfill it in a satisfactory way, you could damage your brand and growth trajectory greatly, given the viral nature of the sharing economy. It’s very much a symbiotic relationship. In addition to showing demand potential to your marketplace suppliers and providing attractive comp terms, ensuring you can onboard them easily and pay them on-time and error free is key.
As your supplier network grows, the focus turns more to retention of your best partners. You would likely start having more competition at this point and therefore you must further differentiate your partner experience so that the best freelancers, contractors, suppliers, etc. choose and prefer your service over other marketplaces in your space. One of the most important touchpoints in this partner experience is the process of paying them. Providing them with a wide range of payment methods and, as you go global, giving them choice of currency options is key as well. Every step in the payment transaction should be communicated to partners including instructing them when issues arise and how they can take corrective action.
As a sharing economy grows, there typically can be considerable friction placed on the back office organization related to onboarding partners, collecting required tax forms, remitting payments to suppliers around the globe, reporting and communication of payment status, and accounting for all these transactions. And regulatory issues are ever-changing on who companies are allowed to pay, when violations can amount to millions in fines or even a shutdown of operations. The trick is to create business processes that can manage all of this efficiently while not distracting valuable resources from growth and innovation.
How does Tipalti help overcome some of these challenges.
Tipalti automates every phase of the partner payment management lifecycle so that sharing economy companies can focus their limited resources on growth, while giving their partners the payment experience they deserve.
What are a few examples of Tipalti in use in sharing marketplaces? How has the platform benefited the companies?
Fast-growing crowdsourcing, on-demand, and sharing economy companies like Outsource.com, Seeking Alpha, Boost Media, GoDaddy, Disqus, Bizzabo, Article One Partners, Visually, and eTeacherGroup have employed Tipalti.
Our customers typically eliminate over 80% of their payment management workload by bringing on Tipalti. For example, before bringing on Tipalti’s payments automation technology, Seeking Alpha, a crowd sourced content service for financial markets, spent seven days a month paying their contributors around the world. With Tipalti, they now only spend one day managing global payments. The company achieved this while also giving their contributors the ability to be paid in their local currency and in their preferred payment method.
How does Tipalti manage different rates, currencies, and payment requirements of a global economy?
Tipalti manages this by interacting with a variety of tier 1 banks and financial institutions. Based on the payee's country, payment method and currency selection, we know which financial partner to work with, their rates, and all the required payment information to collect. Because our platform is agnostic across different payment options and methods, we can remit payments to suppliers in any country around the world in a wide variety of payment methods (ACH, wire, eCheck, prepaid debit card, cash, Paypal, check, etc.) and allow partners to collect their payments in their local currency in over 100 countries.
What challenges are there, behind the scenes, to having a seamless experience regardless of where providers or users are located?
The process of paying partners and suppliers in different countries is incredibly time consuming. Each country has their requirements to process payments. For example, for the same payment method, in India, one must collect IFSC code, tax ID in Russia, Sort code in the UK, etc. There are different character format and length rules for each country as well. One typo or missing field of data and you get a payment error which is incredibly time consuming and expensive for the partner and your staff to resolve. We estimate that there are over 26,000 different payment rule and regulatory variations across the world and they are constantly changing.
A marketplace must also collect the correct tax forms and IDs required by each country and comply with AML/OFAC regulations to ensure you don't pay someone on an international "Do not pay" blacklist. Finally, suppliers in different countries also have different payment method preferences and often demand to be paid in their local currency. This all can be handled manually but that increases payment error rates, compliance risk, and takes a lot of time that can be otherwise be spent growing the business.
Is Tipalti built for small startups or already-established large marketplaces?
Tipalti is adopted by both fast-growing sharing economy startups and more established marketplaces, including several public companies. The common thread is that they tend to make over 100 partner payments a month and often some percentage of those payments are cross-borders. As companies start making a high volume of payments and also have to start paying partners in different countries, they start facing severe pain with their payment processes and that is where we come in.
How does Tipalti scale as companies grow?
Tipalti is made to scale with customers as they increase their partner counts, payment volumes, expand globally, divisions, and add new approval processes and internal controls. Most companies move to us because they have outgrown their manual processes, banking portals, Paypal.
What is the experience of using Tipalti like from the customer side? What benefits are there for them?
One of the core benefits of Tipalti is that we enhance the partner payment experience. Our system offers a seamless web-based, client-branded onboarding process, partner self-service to update their payment information and preferences at anytime, partner choice of preferred payment method and currency, global payment coverage, 24/7 payment status, and more timely accurate payment remittance.
Anything you’d like to add?
As your sharing economy grows, be sure to focus your resources on growth and providing an exceptional product experience. Put the back office processes and systems in place proactively to keep up with demand so that you don't need to significantly increase staff to keep up with the increased complexity that global growth introduces.
This post is part of a series on the sharing economy sponsored by Tipalti.