Payment Methods

For Freelancers, Payment Choice Is Key

The on-demand marketplace thrives on freelancers — but to keep them happy, employers need to be flexible in how they offer payments. In our continuing series on the traits that define an optimal online marketplace, Hyperwallet VP Tomas Likar describes what freelancers want from a payout process.

In an optimal on-demand marketplace experience, suppliers are paid in real time using the payout type of their choice, and the marketplace, not the consumer, takes full responsibility for delivering the funds.

But in fact, this scenario is still quite rare — especially when it comes to paying the freelancers, giggers and on-demand workers that power this growing economy.

In an interview with PYMNTS’ Karen Webster, as part of the continuing series on the traits that distinguish great online marketplaces, Tomas Likar, vice president of strategy and business development at Hyperwallet, weighed in on what freelancers want from an on-demand payout process and what their employers need to consider when setting up payment arrangements in the first place.

According to Likar, the overall governing principle for paying freelancers can be summed up in one word: choice. “Giving freelancers the flexibility to choose when, where and how they get paid is important,” Likar explained, noting that on-demand employers need to abandon the notion that freelancers are satisfied with the fixed, bi-weekly payment cycle common to traditional workplaces. Likar argues that a freelancer should instead be viewed “more like a vendor, [because] they almost operate like a small business. They have to manage their cash flows and have to cover everyday business expenses.” To do that effectively, freelancers need quicker access to their earnings.

It is also erroneous for marketplaces to assume that workers are content to be paid exclusively by bank deposit — statistics show that, even in the United States, the most developed market in the world, as much as 30 percent of the population is unbanked or underbanked. “We advise clients, if they have a signup page that is asking for bank account information for giggers, to see what the attrition rate is … and it could be 30 percent to 40 percent, because when asked for their bank account information, many people simply drop out.”

Likar asserted that companies utilizing freelancers across a global landscape need to be cognizant of the dominant payment method preferences for workers in various regions. For example, workers in Asia might prefer to manage their earnings on mobile devices, while those in Africa might favor cash pickups and, in Europe, bank accounts might be the norm.

Against that global backdrop, Likar explained that the speed of payments matters, too. For example, transactions conducted by large volume sellers in an eCommerce marketplace scenario might mean that workers and sellers are fine with waiting a few days for payments. But for the individual freelancer, who, say, drives for Uber, payments take on a new urgency: “They want real-time payments,” said Likar, “because they may have to go to a gas station and get more gas to make the next trip, or they may have to pay for a quick car repair — they cannot wait.”

Utilizing a global network of freelancers presents further challenges for on-demand employers as they grapple with an increasingly complex payments ecosystem. Likar described how online marketplaces need to juggle bank and nonbank partners with attendant costs in both time and money. Keeping tabs on different countries and their respective payment rails proves particularly difficult. Many marketplaces, he continued, are too small to justify that type of effort, opening the door for integrated payment providers, like Hyperwallet.

When it comes to paying freelancers, “the world is not a uniform place,” said Likar. “We are not dealing with the [online marketplace] business model that we saw even three years ago.”

Click to comment

TRENDING RIGHT NOW

To Top