Affiliate Network Payments Drive Marketer Concerns

Recently, Tipalti released findings of a survey we asked of over 250 affiliate marketers to get their impression about how they were being paid by their affiliate networks and programs. The results provided some conclusive information, particularly when it came to the differences between US-based affiliate marketers and those not in the US.

Affiliate marketers are critical to the e-commerce funnel. They act as both introducers and closers when it comes to driving conversions. And certainly as more brands look to expand into the global marketplace, affiliates in other countries can be highly beneficial to increasing the success of a brand and driving greater revenue as a whole.

Yet issues do exist when it’s time for commission payments. For example, both US (52%) and non-US (41.3%) affiliates have experienced late payments, but global affiliates also have issues with payments never arriving at all. 34.8% of non-US affiliates have had a situation where they did not receive payment compared to 13% of US affiliates.

General satisfaction of payment systems to affiliate marketers is lukewarm. Non-US affiliates expressed a more negative perception of programs. Bear in mind that a large portion (48%) of participants across both US and non-US were only “somewhat satisfied.” While 9% of US affiliates say payments need improvement nearly 20% say the payments need improvement.

In addition to what’s covered in the report, here are some additional interesting conclusions that affect affiliate payments.

• Issue resolution is a big time suck – For affiliate networks, communicating with affiliate marketers about payment issues can be one of the most time-consuming and expensive processes. Very few are staffed to be able to monitor and track every payment and hunt down hundreds of affiliates to resolve their issues. For example, if an affiliate program that makes 1,000 payments has 3% of their payments bounce because of data entry or other account error, that’s 30 issues it must resolve. Often times, that includes identifying the issue (which can also trigger a bank investigation fee), going back to the partner to correct the error, and resubmitting the payment (which includes another transaction fee). That’s also easily an hour of work for every single issue. For dealing with PayPal payment bounces that happen because the payee provided the wrong account information or someone put in the wrong account on the backend, the process can lag for over 30 days because of the way the system holds funds. We have an interesting payment error cost calculator that can help affiliate managers determine what the impact of errors are to their operations here.
• Choice of payment methods is great, but problematic – Adding payment method choices beyond wire transfers and PayPal means adding complexity to  internal processes. And with more processes, the likelihood that errors will be introduced into the flow of processing payments grows, especially if they’re managed by individuals. As stated earlier, more processes often end up with greater propensity for error which can tax an organization not to mention one’s psyche. Tipalti has a great solution for multi-method payments.
• Tax compliance is an after thought with major operational implications – The operational issue for affiliate networks is that if they wait until the end of the year to collect tax IDs to prepare 1099 filings, many times they lose touch with affiliates they’ve added say at the beginning of the year. Tax declarations are an afterthought and not captured at the beginning of the relationship. The general perception from affiliates is that only 30% say most affiliates are automated in terms of collecting tax data. For the rest, it’s a mix of some automation, mostly manual, or no processes at all. So certainly if the process isn’t automatic, it’s going to require a staff member to track down each affiliate and request proper tax documentation. And again, because of the complex nature of tax rules regarding non-US affiliates, the process can be confusing and certainly manual.
• Affiliates are freelance and free range – Affiliates have transient qualities where their numbers are dynamic. Revenue opportunities can increase dramatically overnight. Likewise, affiliates can sometimes drop off the face of the earth without warning while new ones pop up all the time, eager to maximize their audience. This chaos can lead to serious payment issues for networks if they are not properly on-boarding affiliates with the right information. It can also introduce fraud and payment errors later. As they say in computer programming: “Garbage in, garbage out.”