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Payments Solutions For The 1099 Workforce

By 2025, there will be over 500 million 1099 workers – independent contractors – in the world – and by 2020, 40 percent of the world’s population will be “freelancers” without ties to any one particular employer. That’s not much of a surprise – the proliferation of platforms like Uber, Instacart and Elance make it easier for providers with supply to find users with demand. The expansion of direct selling platforms like Avon, Herbalife, and Stella and Dot create new opportunities for people to supplement their income.

What is a surprise is how ill-equipped the existing payments ecosystem is in enabling platforms to pay those on-demand workers and for those workers who knit together multiple on-demand platforms to earn their full-time living to comply with federal and other jurisdictional tax rules and regulations.

That’s the problem set that Hyperwallet set out to solve years ago when it was presented with the problem that global direct sellers and employers with large temporary workforces (think coders or customer service workers) had in paying their workers – anywhere, in any currency, and in any method, including cash and direct to bank account.

It’s a foundation that Brent Warrington, the former CEO of SecureNet, was brought in to both leverage and expand. Warrington, who led SecureNet to a successful exit through an acquisition by Worldpay in late 2014, took the reins of Hyperwallet in May of 2015. Warrington believes that Hyperwallet is in the sweet spot of macro workforce trend and enabling technology platform to meet the needs of what he calls the new “global collaborative workforce.”

Warrington caught up with MPD CEO Karen Webster and shared his thoughts on what led him to make the change, and the exciting possibilities – and challenges – that are being presented in an economy increasingly driven by “the 1099” worker.

KW: SecureNet was all about making payments and commerce more accessible to innovators who want to enable electronic payments into their businesses. Hyperwallet is also about payments – yet with a different focus. Can you explain the difference and the appeal?

BW: I’m very proud of the work that SecureNet did in helping to facilitate the transformation of the acquiring side of the business, streamlining and taking friction out of inbound payments – payments made to someone.

In the back of my mind, though, I’ve always been intrigued by how easy companies like SecureNet and Braintree, Stripe, and Square made it for companies to accept payments – worldwide. In many ways, they opened up a new economic model that caused the independent global collaborative workforce to expand and scale.

But I’m a guy who believes that the story has been written on acquiring. There’s not a lot left to write or innovate. Now we’re in the “waiting and watching” phase to see who’s going to survive and who won’t. So, what’s interesting to me is to turn the focus to outbound – making it easy for companies to pay these workers all over the world.

For the last two to three years, we’ve seen the emergence of all the marketplaces — the Ubers, the Lyfts, the Airbnbs, the uShips of the world – that have created a model around putting people to work, who are paid independently, and that, in many cases, allow people to start their own businesses and pursue their dreams.

The difficulty raised by this new way of doing business is that, because it is borderless, new frictions have emerged between corporations, those they serve and those they pay.

For example, being able to move $50 into any local currency, anywhere in the world, is not a trivial thing – it never has been. Between the complexity of the supply chain, the time and cost, and the regulatory environment, just to name a few issues, moving money is not easy. The thing is, it needs to be trivial. In order to complete the circle of enabling this global collaborative workforce, there has to be a simplified, frictionless model for these independent workers.

So, in my mind, that is the opportunity. Hyperwallet is in an as good as or better position than anybody in the world to be able to bridge this gap and take out the friction. More importantly, it can be the platform for linking 1099 workers to these new platforms by not just moving payments out to them, but by giving them the tools that they need to be successful: tax payments, investment planning, insurance, expense management, and the like.

KW: The distinction, then, is that SecureNet was about enabling innovators to create new business models, while Hyperwallet is about enabling those who are benefiting from those innovations to actually eliminate the friction in being paid. Is that accurate?

BW: Absolutely. I would even take it a step further.

Hyperwallet is actually a very, very technology rich platform. There are more services than just figuring out how to move payments into a country into the local currency – which, again, is not a simple task, although it is one that this company has mastered. We’re creating an ecosystem of 1099 workers; today we are connected to and interface with over 5 million of them, and we’re facilitating their interactions around the world.

The McKinsey Global Institute recently released a report saying that by 2025, there will be over 500 million individuals globally who are impacted by the 1099 economy; and TechCrunch ran a story that said within the next five years, 40 percent of workers globally will be independent contractors – it’s happening.

It didn’t just start two years ago with Uber. That company did create a whole new level of excitement with its products and services, but the changes we’re seeing now can be traced back 20 or 30 years. It goes back to Mary Kay, it goes back to Avon….

KW: Aha! The Avon Lady, and Tupperware, and Amway – all of those house-party/direct selling model businesses! I think my mother was involved in most of them - Sarah Coventry Jewelry, the Pampered Chef…and on and on.

BW: That’s where this company cut its teeth.

In addition to the over 5 million 1099s in our ecosystem, 5 of the 10 largest direct selling organizations in the world use our platform. On any given day, we’re loading over $50 million into our network, and in doing so, servicing everyone from the traditional sales organizations to the newest collaborative economy players.

What’s really exciting is that Hyperwallet is becoming a central point for this interaction between all these independent 1099s around the world and business opportunities. We’ve been very payer focused – and we’ve built a great business model around that – but now we’re starting to become more focused on payees. I think we have positioned ourselves to take advantage of this movement, as we’re poised for an ecosystem that will – within the next 36 months – contain 100 million payees as part of the Hyperwallet platform network, being linked by us to business opportunities and pursuing their dreams.

Every day, a marketplace starts; every day, somebody moves out the “employee ranks” into the 1099 realm; and every day, there’s a need for Hyperwallet to help bridge the gap between the payer and the payee. Because of the relationship we have with both sides, we are able to provide additional value-added services in that process.

KW: It’s so interesting to hear you talk about Hyperwallet’s focus, because it’s a very different strategic positioning than what the company has articulated in the past. It’s always been about mass payments, but use cases have been a little more narrowly defined.

It’s been freelancers, but really more freelancers plus people who are paid to participate in research studies…or, where you’re distributing incentives, or big batches of small dollar value payments. At the core, that’s really still what you’re doing, but the slight pivot has been to support the on-demand economy and on-demand labor force.

But payments, you say, is just the beginning. You’re also advocating Hyperwallet truly as a platform to enable additional services like tax withholding?

BW: Yes, we’re already doing that. We help 1099 workers with tax planning, expense reporting, expense management and the like. On the other side, we help payers with compliance and KYC. We’re helping them take the risk out of their business in addition to facilitating promoting additional 1099s in their ecosystem, but more importantly – we get them paid.

Mass payments are still part of what we do. We have payers that will send us several hundred thousand payments that need to move into a hundred currencies and not any one payment is more than $100. The pain and the friction at the Treasury organizations to be able to do that is tough; we simplify it.

KW: So many platforms that bring factions together – whether it’s buyers and sellers, or businesses and individuals – are really becoming ad networks, as well, albeit not in the traditional sense. Because you have the necessary scale, you appear to be in a position to offer deals to providers who want to reach your people. That could be a lucrative method of monetizing the platform and your relationships.

BW: Without a doubt. Our DNA is our global network – and that’s nothing to sneeze at, being able to move a payment of any size on behalf of a payer to a payee anywhere in the world.

One of the great things about Hyperwallet is that we own the first mile and the last mile of our global network, in addition to the network itself. We’re not just an aggregator of payment types. On the first mile, we’ve created a very simple way to give the tools needed to a payer; and on the last mile, payees are offered complete optionality as to where that payment lands and in what format.

It’s somewhat of a cultural shift, but it’s always been part of the DNA. I see Hyperwallet as the global facilitator of the independent workforce.

KW: You’ve been CEO of the company for what – about a month now?

BW: Yeah, six weeks. I haven’t slept yet.

KW: You’ve done an awful lot in that time. Everybody says the first 100 days kind of set the stage and the tone of new leadership. What are the next 60 days going to look like for you?

BW: The business that I inherited is one that is incredibly healthy and high-growth. At this point, it's all about acceleration.

We know exactly how we want to do that; the next 100 days and the 100 days after that will be about pushing the accelerator in the appropriate increments. We’ve identified some specific value-add services that we want to bring into our ecosystem. Meanwhile, we’re going to continue to refine how we can better engage and facilitate 1099 workers, and work with our payers to help them attract more payees into the ecosystem and sell more products and services.

We’re invested heavily in product, and we’re continuing to invest in our global network – which we believe is a complete differentiator for Hyperwallet – and the platform. We’ll continue to bring in exceptional talent, and the nice thing in that regard is that people are starting to really take notice of the company.

I’ve been doing this a long time, and I’ve built two great companies – both of which solved specific needs and were, in my mind, game-changers. I have never felt better about an opportunity than the one that exists at Hyperwallet: We put people to work, we help them get paid, and that’s exciting to me. It’s a completely different feeling than one gets from building a great acquiring business or an online banking business. It just feels good.

KW: People talk about the need for new rails because the existing ones can’t accommodate use cases. You’ve been able to overcome that. What is it about your technology that makes building new payments rails – and the immense cost that would come with that – unnecessary?

BW: Everybody would love to figure out a simple way to plug into something, flip the switch and create a real-time, interchange-free network. It’s not a reality.

Hyperwallet has created a platform that allows literally real-time money movement all around the world, utilizing existing rails and networks. The platform is specifically designed to remove friction and accelerate the process of paying people.

One of the things that I love about the existing infrastructure is that it is hardened, that it’s proven.

We see compliance and risk management as core assets of our company, as defined by the world in which we do business. The world’s moving faster; it’s moving globally; and we have to continue to move at the speed of the world. We are building a business around consumer behavior. Consumers want to start their own businesses; they want opportunities; they want the freedom to pursue their dreams. And we’re going to help them do that.

BrentWarringtonBrent Warrington, CEO at Hyperwallet

Warrington brings more than two decades of commerce and payments industry experience to his leadership role at Hyperwallet. Most recently, he was the CEO of SecureNet Payment Systems (acquired by Worldpay), a provider of cloud-based payment solutions for merchants that integrate point-of-sale, mobile, and eCommerce payments processing. SecureNet created the industry’s first, award-winning, frictionless, multichannel payments experience, which changed the landscape and led to the emergence of the “omnichanel” approach.

Prior to joining SecureNet, Warrington served as the CEO of FundsXpress Inc (acquired by First Data), a successful online banking startup that was the industry’s first true SaaS online banking platform. Warrington has also served as Senior Vice President and General Manager of ePayments at First Data Corporation. Warrington was previously the Vice President of Global Market Channels at Electronic Data Systems (acquired by Hewlett Packard). In addition, Warrington has served as Director of Global Strategy and Marketing within EDS’s Financial Services Business Unit, where he led the organization’s Y2K transformation.

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NEW PYMNTS DATA: HOW WE SHOP – SEPTEMBER 2020 

The How We Shop Report, a PYMNTS collaboration with PayPal, aims to understand how consumers of all ages and incomes are shifting to shopping and paying online in the midst of the COVID-19 pandemic. Our research builds on a series of studies conducted since March, surveying more than 16,000 consumers on how their shopping habits and payments preferences are changing as the crisis continues. This report focuses on our latest survey of 2,163 respondents and examines how their increased appetite for online commerce and digital touchless methods, such as QR codes, contactless cards and digital wallets, is poised to shape the post-pandemic economy.

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