Mobile Commerce

Shifting Away From the “Payroll Paradigm”

The global reach of the eCommerce marketplace model has opened up income opportunities for people where once none existed. Getting people paid on time — when the on time means “on their time” — is a key element in fostering loyalty, Hyperwallet’s Michael Ting told PYMNTs’ Karen Webster. 

To keep people happy in the global marketplace — especially sellers — marketplace platforms need to make sure the money comes in on time.

That’s among the findings of the latest Hyperwallet study that delved into what people want from their online marketplaces.

In the research, titled The State of eCommerce Marketplace Selling in 2017, Hyperwallet’s survey of 1,500 marketplace sellers revealed that getting paid quickly is among their top concerns. As many as 13 percent of respondents said that they have had to miss a payment obligation, such as rent, because a payout from an eCommerce company was late.

In an interview conducted by PYMNTS’ Karen Webster, Hyperwallet’s Senior Vice President of Digital Markets, Michael Ting, pointed out that flexibility of payouts also emerged as a key desire in the emerging global marketplace.

“The whole question around the speed of payments is becoming more pronounced,” said Ting. “You’re hearing about it more and more.”

The macro consideration here, he explained, is that the cost of living is outpacing individuals’ wages. Many workers are living paycheck to paycheck, and traditional income opportunities — for example, a typical 9-to-5job — are disappearing or no longer paying sufficiently. These individuals are looking to marketplaces in pursuit of additional income and are helping fulfill the supply-side requirements of operating an online marketplace.

Another benefit that many marketplaces offer is more frequent payment schedules — they allow workers to break away from the typical biweekly “payroll paradigm” and can provide earnings access at the completion of a job, every week or even every day.

“They leave it up to the individual to see what works best for them,” said Ting.

The stats in Hyperwallet’s report help explain why customers join certain marketplaces — and why they remain loyal. Webster highlighted findings that suggested loyalty on the Etsy platform is engendered by “having a passion,” while for Amazon and eBay, the typical motivation is “making extra money.”

Platform loyalty is also influenced by the cost of working across a platform and the frequency of its payouts. Broadly speaking, more than 70 percent of the respondents and sellers to the Hyperwallet survey said they would leave a given platform should the fees get too high — but at the same time, they would accept higher fees if they got paid faster.

This trade-off can be explained by more closely examining what the sellers are actually doing, Ting said. If an individual is running a small business — perhaps manufacturing materials — then “they need money to essentially service working capital … to keep the velocity [of their business] going.”

Here, payment speed is king — but it’s a different story for an individual who is using the platform to support half of their household income and needs the highest possible return.

For the payments functions of the platforms themselves, there is no one-size-fits-all model in place. As Ting explained, different situations demand different payments needs. Still, the study found that more than half of sellers — 53 percent — want to receive payments every time they sell a product.

In addition to concerns over the expense of marketplace fees, sellers also took issue with the transparency of those fees — namely, that they are difficult to calculate. Ting said it is incumbent on the marketplace to ensure a level of reliability and predictability when it comes to fees, as “every percentage point … makes a difference to [sellers].”

For example, one respondent noted that selling a product for $2 could in fact result in proceeds of no more than $0.50. According to Ting, that lack of transparency can stem from the way payments are made across legacy systems, particularly in the case of cross-border payments.

Changing gears, Ting highlighted one burgeoning way for the marketplaces to create incentives for sellers: a tiered payments structure where payouts can be higher or made more frequently if that seller is generating a lot of business or high favorability ratings. The platforms grab a benefit here, too, as they would be able to differentiate their value to the sellers — in other words, a marketplace will get more sellers if it treats them better.

Ting noted that advancements in technology and the mobile realm have cast a “wider net geographically” for marketplaces, with higher technology penetration in emerging markets enabling sellers from all parts of the world to interact with buyers globally. Cross-border payments will become crucial for marketplaces, Ting explained, adding that buyers need to make purchases online without consideration of where the selling party is. Conversely, “sellers do not have to worry about the inherent risk of accepting payments from somebody who is not in their home country.”


Featured PYMNTS Study: 

With eyes on lowering costs to improving cash flow, 85 percent of U.S. firms plan to make real-time payments integral to their operations within three years. However, some firms still feel technical barriers stand in the way. In the January 2020 Making Real-Time Payments A Reality Study, PYMNTS surveyed more than 500 financial executives to examine what it will take to channel RTP interest into real-world adoption. Here’s what we learned.

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