Navigating The Regulatory Labyrinth Of Gig Economy Payments

The gig economy is gaining traction all around the world. But how does global expansion affect the payment processes that keep these contractors and freelancers invested? Even as work becomes increasingly decentralized and jobs permeate international barriers, cross-border payout friction remains.

Often it’s these outbound payments that trip up firms as they seek scale and balance in new locations, driving them into uncharted regulatory territory. In an interview with PYMNTS’ Karen Webster, Mike Monty, EVP and head of financial partnerships at Hyperwallet, delved into the issues facing enterprises expanding their payout processes overseas in the brave new world of the gig economy.

Webster, describing the payments conundrum as the “nasty underbelly of making these payments to any worker in any environment,” suggested it could be summed up in a single word: regulation.

“There’s the Hyperwallet platform that masks a lot of the complexity and makes things easier for our clients,” Monty explained, and then, there’s “the plumbing, the actual delivery of funds through our financial partners.” These are the challenges that firms discover when they decide to go global. For example, they may experience a fairly uniform payments environment across the U.K. and Europe — the kind of payments infrastructure that the gig economy needs in order to quickly distribute low-value payments to many individual contractors.

However, as they extend to other regions — such as Latin America — they soon learn that payments structures and processes can shift dramatically from country to country, and each may have radically different regulations when it comes to dealing with how people get paid. “Payment regulations, prepaid card regulations, controlled currencies,” Monty began. “Moving money in and out and across jurisdictions [in Latin America and elsewhere] becomes tough.”

Issues can also arise when firms are working alongside the unique expectations of unfamiliar cultures. Some markets demonstrate certain preferences in how workers receive payment for their work. As an example, Monty explained that, in Mexico, prepaid cardholders might use their cards more at ATMs, while workers in another locale — say, New York City — might use those cards more at the point of sale. Against this backdrop, banks must contend with payment outflows, inflows and regulations. Dealing with these differences across geography is challenging, Monty added, suggesting that there are no truly global banks — even among the biggest of institutions.

Another example: Brazil, a country that has been marked by hyperinflation, has a “very complex payments system,” and “even if you have a local entity in the marketplace,” businesses must grapple with satisfying tax authorities and different rules governing different types of transactions. Monty explained that not all banks are able to offer foreign exchange services in Brazil — they may need to get a foreign exchange license and must also be able to provide the subtleties of service that are demanded in that country. Local taxes on deposit products can present difficulties as well, making it a challenging country for some to penetrate.

Monty described how, for Hyperwallet, the process entails not just understanding payments flows across borders and the rules that govern each jurisdiction but also recognizing the different challenges that may be faced by different industry verticals. Such preparations must be made before Hyperwallet enters a new jurisdiction, said Monty, with analysis jointly performed by Hyperwallet, local experts and global and/or local bank partners. Additional steps include KYC compliance, as well as anti-money laundering processes, he added.

“When we look at going into different parts of the world, we often do so incrementally,” Monty explained. “Our approach is a beneficiary-directed platform that reflects local preferences.”

With the ability to reach out to payees across far-flung locales, Hyperwallet can serve its corporate customers through local direct-to-bank/ACH payments — the cheapest and most transparent way to make payments. In other cases, payments can be delivered through prepaid cards (physical and virtual), wires and cash pickups.

“We’ve built a platform in which beneficiaries can be serviced through multiple payment types” Monty told Webster. “Depending on the jurisdiction, there are multiple payment options available.” In a local setting, he said, prepaid cards often appeal as they offer a branded experience in multiple currencies and can provide real-time access to funds.

Webster asked about the complexity of delivery (and stickiness and loyalty) when there are no large banks — or even much in the way of local bank options — available to complete gig worker payments. That’s where platforms like Hyperwallet become especially valuable. “We’ve built this to be a network of networks,” said Monty. The flexibility in payment options gives payees choice in how they’re paid, meaning that Hyperwallet’s corporate clients can pay their gig workers in almost any locale while maintaining “full control of the end-to-end user experience.”