Mass payment, or batch payment, is a method used by organizations to pay up to 5,000 recipients simultaneously in one batch, regardless of their location, currency, or payment method. Since mass payments are made online, payments are instantaneous and help organizations save time, money, and resources by expediting the payment process.
Businesses using mass payouts
Mass payouts have been getting a lot of buzz recently, especially among technology-based businesses that depend on low churn and partner retention. Brands competing in verticals like online marketplaces, adtech, eCommerce, and affiliate marketing are increasingly faced with issues relating to scalability, tax compliance, and regulatory risk when making mass payments.
Mass Payouts Beyond Payment Processing
The term payout refers to a payment made to a payee. While the core component of any mass payout program is still payment processing, making mass payouts is actually a multi-step process going well beyond the actual remittance of money. In fact, these are areas that are crucial and why a basic banking interface or interface with an ewallet (e.g. PayPal, Payoneer), are insufficient.
Before the payment is even made, partners need to onboarded, tax forms need to be collected, and compliance checks must occur. In other words, they need to be marked as “payable.” Then, depending on the business model and company’s technical infrastructure, the payout platform may need to be integrated with an analytics application (especially for affiliate company or an ad network). Other businesses often need to integrate their payment platform with an ERP. After payment information has been communicated either through an API or file upload, that information needs to be checked and validated. Payment status communication is another critical component of the mass payout workflow that goes beyond the payment itself.
Scaling Partner Payments
Internet brands such as online marketplaces often begin as scrappy startups. Self-funded or bootstrapped, sometimes with a seed investment round, a minimally-viable product (MVP) is often the first iteration of the online marketplace. With a limited amount of money and time, the founders often go for the simplest and most cost-effective method of making payouts to their partners, sellers, or sub-merchants. The MVP approach often involves a labor-intensive manual process. Once product-market fit is realized, it’s time for the company to scale. Scaling a digital economy business means attracting and retaining partners. A process that was once achieved through a manual system can quickly become a growing pain as new partners are continually needing to be undergo onboarding, vetting, and validation.
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Mass Payout Services
Digital economies have experienced massive growth over the course of the past decade. With the rise in popularity of streaming video and audio, monetization networks have exploded – new networks seem to pop up almost everyday. These networks help producers and developers monetize their work. Mass payouts are a fundamental business function of these monetization networks. In order to attract quality partners and keep churn rates low, payments must be timely and reliable. In some cases these companies use a ‘home-grown’ solution (a payout platform developed in-house) to execute payouts while others turn to a mass payout service to solve the problem. A number of mass payout services exist and all have their pros and cons. Some of these payout services function well for domestic payouts but lack the capability to execute cross-border global payouts. Other mass payout services are strong when it comes to remittance but lack important functionality needed for payment reconciliation or tax compliance.
Mass Payout Solutions
Evaluating mass payout solutions can often be a daunting task. It’s difficult to forecast and account for all of the potential scenario or use cases where more robust features or functionality may be needed. The most pervasive function of a mass payout solution is its ability to execute payments. Scaling a mass payout program often requires features that transcend the actual transmission of money. Some of these important features include payee onboarding, payment detail validation and verification, tax form collection, ERP integration, and payment reconciliation. For digital businesses where payees are valued partners, the selection of a robust and scalable mass payout solution can be integral to the success of the business.
Will a Payout Platform Save You Money?
The easiest way to determine whether a platform will save your business money is to calculate what you are currently spending on payouts per month, currently, compared with what your service provider will charge you for a platform. You must also take into consideration how much money you are losing when you spend time using other methods.
First, if the amount of money you spend per month making affiliate payments exceeds the amount you will pay for a simple platform, you should invest in a platform. Do you spend more per month making partner payments that the cost of a software solution for payouts? These costs could be associated with a range of activities including mailing and writing checks, to dealing with missed payments or bounced checks. Banking fees whether monthly or per transaction can also add up to hefty sums.
You will not need to worry about these issues, with a platform, because suppliers can choose the method that works best for them, and you can keep track of your payments easily. This is especially important for businesses that have many suppliers, because they can ensure the suppliers are getting the money they need, since they are able to keep track of payroll expenses online.
Another way that payout platforms save businesses money is that it saves you time. Whether you realize it or not, the more time you spend trying to sort through your mass payments every month to make sure every suppliers gets paid will cost you money, in the long run. This is especially true for businesses that employ a workforce of accounts payable clerks, managers, and processors because there is a direct set of costs associated with the amount of time it takes to manage high volumes of payments. All this time could be better spent on other areas of improving the company.
The Bottom Line for Mass Payout Software
Businesses ranging from startup online marketplaces to enterprise software companies have been able to save time and money by implementing a mass payment solution. So, whether you are a small business, or a large chain, you can consider a payout platform to save you money long-term.
If your business has relationships with suppliers, partners, affiliates, or publishers internationally, then a mass payout platform will bring cost savings.
Tipalti offers a payment error cost calculator to help you understand the costs involved in resolving errors that occur when paying suppliers and partners. All of this can be alleviated by leveraging an end-to-end accounts payable automation platform.
In addition to consolidating payment activities into one robust solution, early payments can actually turn your payables operation from a cost center into a profit center.