This interview explores what we can learn from the rapid rise of the platform and gig economies and discusses how key processes – such as marketplace payments – have changed permanently as a result of these new earning opportunities. We will consider the unique challenges in the UK and Europe, and how geographic boundaries are increasingly irrelevant in a model where cross-border payments are the norm and need to be delivered with the same speed and efficiency as domestic payments.
Aran, you have held many executive positions in fintech companies. How did you first learn about the marketplace payout segment where Hyperwallet plays? What do you find interesting about payout?
Payouts have always been around, but never on the scale we see today. In the past, businesses would do maybe somewhere between 100 and 500 transactions each month. Today, we often see companies doing tens of thousands of payouts per month. Many of them are new digital marketplaces that appeared only few years ago – they have thousands of sellers, freelancers, or vendors that need to get paid, and managing the supply side is just as important as managing the demand side.
The part that's really exciting is how technology companies – specifically fintech – can bring efficiency in these models that traditional financial institutions just weren’t set up for. Think about the expenses and manual processes involved with sending USD 200 to Brazil. It’s because SWIFT and other systems were set up for large B2B transactions, but those workflows don't work for the low-value global payments (i.e. marketplace payouts) that B2C companies need to make.
As an expert in the fintech space, where would you position Hyperwallet's business case? What do you find interesting about marketplace payouts?
Marketplace payouts are very exciting to me, personally. It’s a completely new space, still in the early days of disruption. When you think about it, five years ago very few companies had to think about payouts – freelancer/gig economy models were just getting started, and most companies were able to manage these processes in-house. Now you suddenly have ecommerce companies that are paying hundreds of thousands of sellers, you have home-sharing companies paying thousands of homeowners – this completely changes the business requirements and can only be done with the right technology. Banks are not ready to compete in this space, so that's why we see a number of specialised marketplace payout players, like Hyperwallet, taking over.
In line with the previous question, how is Hyperwallet’s payout platform positioned to take advantage of the gig economy and the underlying workforce flexibility?
We built our payout platform from the beginning with low-value mass payments in mind. We made sure that everything was automated and that we could quickly scale our systems to millions of payments.
Our platform is built on three critical pillars. The first is our proprietary financial network. We operate a global network consisting of 45 bank and non-bank partners. This gives us the flexibility to see the transaction end-to-end, deliver funds using low-cost local flows, and guarantee how much and when funds will arrive in the payee's account.
The second is our back-office platform, which streamlines marketplace payout operations. Our corporate administration portal makes it simple for treasury to create new payees, load transactions, look up the status of previous transactions, manage funding balances, and so on. In addition to this, our clients typically ask us to take over some back-office functions, such as customer support, reporting and reconciliation, tax services, and foreign exchange.
Finally, we offer flexible white-label integrations for payee-facing applications. We recognised that marketplaces want to control the user experience, so the Hyperwallet brand is hidden from the payee. We are simply a payout API layer that anyone can integrate into their existing systems.
Do you think we are really on the verge of major changes in how people work and how they receive their income?
Definitely. All of these new digital platforms are allowing people to become self-employed and start working immediately. In the past, as a freelancer, you had to build your network and find the right pool of customers, which could take years. Now, you just sign up and the digital marketplace platform will find you customers in minutes. When you ask these independent workers how they like this new way of working, over 90% will say they are more satisfied and don’t plan to go back to regular employment. At the same time, about 60% of them say that their biggest uncertainty is how, when, and where they will get paid – and that's where marketplace payouts come in. Platforms need to focus on this issue if they want to keep a loyal pool of freelancers.
In your opinion, what challenges does this shift bring for employers?
Employers have to realise that they are not dealing with a regular payroll situation anymore. It’s not as simple as paying once per month – in the same amount and currency – through your bank provider. Now they might be dealing with people in 50 countries using different currencies and several providers. This also brings enormous complexity in compliance/regulatory requirements and an increased need for staffing up the internal finance team. Managing this ecosystem is costly, and very few companies have the scale and expertise to justify having this function in-house.
Hyperwallet is the payout provider of choice for many marketplaces that have been driving the Earning Revolution. When you talk to marketplaces, what do you think is at the top of their mind from a payments perspective?
Marketplaces typically have two goals: number one is improving the payee experience. They want their payees to have a choice in where, when, and how they get paid. They also want to increase the speed of their payout cycle and get as close to real-time payments as possible. Most marketplaces have realised that if they provide a fast and reliable payment process to their sellers or giggers, they become more loyal and more active, which leads to improved economics. The second objective companies have is optimising their in-house processes and minimising the cost of their back-office operations. Bank transaction costs are just a small part of the overall cost; large marketplaces need to have payments operations teams, treasury, customer support, compliance and KYC processes or data security specialists, and so on. All of these costs add up quickly, so we typically help companies figure out which parts can be optimised or fully outsourced to us.
At the same time, we’re not talking about this shift happening just in the digital marketplace segment. You mentioned that other industries will also be affected and forced to innovate. What do you think other industries can learn from gig economy players?
I think the core innovation that gig economy players introduced is the relentless focus on the supply-side experience. They make sure that it's very easy to sign up, start working, and receive earnings as soon as the first job is complete. It’s a very competitive industry, and one of the key factors that leads to positive experiences is a frictionless and transparent marketplace payout process.
If we look beyond Europe – where do you see new opportunities? Based on your opinion, which regions will be on the forefront of the Earning Revolution and gig economy innovation?
To be honest, we’ve barely scratched the surface in North America and Europe. There is still a long way to go for fintech players – and marketplaces – to gain massive adoption. Therefore, we think the growth will primarily come from these two regions.
That said, there are several interesting markets in other parts of the world. We believe that India is on the verge of a fintech revolution – demonetisation and an increasingly banked population are driving the demand of new digital financial services. Moreover, ecommerce in India is finally reaching an interesting scale, which will further drive the adoption of digital payments and payouts. We also should not forget about Africa – countries such as Nigeria and Egypt are still in the early stage of digital payments adoption, but they will likely become very interesting in the next three to five years.
About Aran Brown
Aran Brown is the Managing Director of Europe at Hyperwallet, a leading global payouts provider for independent workers, sellers, and distributors. A payments industry veteran, Aran has more than a decade of experience in senior roles with FC Exchange, Western Union Business Solutions, and Skrill, among others.
At Hyperwallet, our goal is to provide organizations with a frictionless, transparent, and reliable way to distribute funds to their independent contractors, suppliers, and resellers. Available via a hosted online portal or through REST API integration, Hyperwallet’s payment architecture helps gig economy and marketplace companies enable localized, multi-currency funds distribution to payees globally.
With Hyperwallet, you can ensure that your payees get their money quickly and conveniently—wherever they are.
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