The Somber Truth Around Affiliate Network Payments

“Liquidation and constriction” are not terms you want to hear from a payment processor, yet it’s happened. Payments to affiliates have been shut down by processors, where entire bank accounts are liquidated and any movement of funds constricted. Affiliate payments in certain sectors are riskier than others. For example, the adult entertainment industry or cannabis marketplaces can unexpectedly be shut down by payment processors. This can dramatically affect other networks serviced by the processor.

It’s unfortunate that affiliate networks and performance marketing are associated with more high-risk industries. As expert marketers in ad-tech circles will attest to, affiliate marketing provides an invaluable service to brands, because they’re so adept at driving measurable, last-click demand generation and brand awareness. Plus, with so many more content producers today across social, video, and digital publishing actively monetizing the attention of key demographics, the affiliate space is critical to generating waves of interest in the vast corners of the internet. It’s almost the habit to filter out a display ad from one’s attention. It’s much harder if the brand message is embedded in the content.

Brand-safe networks and affiliate programs shouldn’t be unfairly damaged by payment processors who are also dealing with NSFW partners, but it happens. And when that payment option is shut down – either by the processor company or potentially a government entity – those networks are left with little recourse. This can harm not only the network with a loss of affiliates, it can damage the network long-term by failing to attract affiliates who deem it risky to join up. Nearly half of affiliates would drop or have dropped a network because of a payment issue.

Here are some key best practices to protect you, your brand reputation, and your affiliate partners.

• Understand how your payment processor works. Nearly all processors are backed by some bank (hopefully). If not, be wary as that could indicate even greater risk. Ask about their methodology for evaluating clients and their criteria for acceptance. It’s not enough to be a money transmitter. For the record, Tipalti adheres to a strict list of business types we do not work with. It’s the best way we know to maintain our standing with tier-1 banking partners and mitigate risk around our services for our customers.
• Diversify your payment method options. While prepaid debit cards are convenient, if something happens to that method, there needs to be other means to remit to affiliate partners. US ACH is great for US payees. For other countries, there is PayPal, wire transfers, and echeck / global ACH. Echeck is particularly well-suited because of its relatively low cost and ability to land directly into the affiliate’s bank account.
• Scrutinize your own affiliates. Know who you’re paying by routinely gathering identifying information such as tax documentation or corporate structure information. Particularly when working with global affiliates, don’t put your operation at risk of paying a bad apple. Even unknowingly paying someone on a government blacklist so can shut you down. Check your affiliates before every payment.
• Continually evaluate circumstances and solutions. It’s not a static world. Payment volatility can change quickly. New regulations or interpretations of rules can sideswipe ill-prepared payment operations. Risk mitigation is an ongoing process, not a one-time effort.