5 Payment Must-Haves for Global Crowdsourcing and Online Marketplaces
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Robert Israch CMO Tipalti
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5 Payment Must-Haves for Global Crowdsourcing and Online Marketplaces
- 1. Tipalti Confidential – Do Not Distribute Rob Israch | CMO | October 5, 2017 5 Payment Must-Haves for Global Crowdsourcing and Online Marketplaces
- 2. Tipalti Confidential – Do Not Distribute Increasingly Competitive Crowd Space = More Selective Partners • Harder to attract • Harder to retain • Provide a great experience • GO GLOBAL to expand supply
- 3. Tipalti Confidential – Do Not Distribute How Global Partners Benefits Your Crowd • Expanding the population of providers • 24x365 potential • Controls margins with Hub & Spoke model • Adding diversity to offerings But it comes with challenges • Process Complexity • Scale Issues • Risks & Regulations
- 4. Tipalti Confidential – Do Not Distribute 5 Payment Must-Haves
- 5. Tipalti Confidential – Do Not Distribute #1 – Adopt a “Lean” Philosophy • Reduce friction internally and with partner relations • Scale globally effortlessly • Maintain operating margins • Establish infrastructure to grow with you
- 6. Tipalti Confidential – Do Not Distribute #2 – Develop Cross-Border “Intelligence” • Global payments are complex – over 26,000 rules • PayPal? Global ACH? Wire? ACH? Currencies? • Payment errors are big headaches • Return fees are expensive
- 7. Tipalti Confidential – Do Not Distribute #3 – Deliver a Best-in-Class Payment Experience • Control your brand • Stop email-based onboarding • Aim to eliminate errors • Ensure global reach • Provide choice • Give proactive status communications • Give 24/7 portal access
- 8. Tipalti Confidential – Do Not Distribute #4 – Be Tax Compliant • FATCA laws designed to find offshore tax shelters • Payer responsible if Payee doesn’t provide right forms – 30% penalty! • W-9, W-8 series, VAT • Must verify tax details during onboarding • Withholding calculations prior to payment
- 9. Tipalti Confidential – Do Not Distribute #5 – Get Proactive on Fraud Protection • Bad actor potential increases • Check government blacklists (OFAC, OFSI, etc.) • Check at the time of payment • Check for duplicate or near duplicate payees • Check for reused IP addresses • Ask for tax ID data
- 10. Tipalti Confidential – Do Not Distribute Global Partner Payments To-Do Review 1. Live by a lean philosophy 2. Develop cross-border intelligence 3. Retain partners with a great experience 4. Ensure FATCA tax compliance 5. Be diligent about AP fraud
- 11. 11 Tipalti Confidential – Do Not Distribute m 98% Customer Satisfaction | $3B+ in Transactions Managed Annually | 1.8M+ Payees Solving Crowdsourcing Payment Operations
- 12. Tipalti Confidential – Do Not Distribute Questions?
- 13. Tipalti Confidential – Do Not Distribute Thank You! @risrach / @tipalti
Editor's Notes
- Thank you, everyone. And thank you to CrowdsourcingWeek for inviting me. My name is Rob Israch. I’m the Chief Marketing Officer at Tipalti.
- Crowdsourcing and online marketplaces are becoming a bit crowded (pun intended). Every day, new services are coming up and even more traditional brick-and-mortars like Ikea – who just acquired TaskRabbit - are starting to adopt crowd and marketplace models. On the consumer side, that may mean we will slowly start being overwhelmed by choice – we’ll see. But on the partner side, there is definitely going to be some challenges in finding high quality, reliable providers for your business. If you have a driver who’s signed up on two ride-share marketplaces, who do you think she will choose? Probably the one with the most consistent reward and are the easiest to work with. So operationally networks need to improve their processes. We’ll touch on that for sure, but there’s one way to increase the available supply chain. Go global!
- Before you can endeavor to go global with your partner-base, you have to shore up the processes you use to work with your partners. Many of you, unless you have a huge round of funding - congratulations by the way – you are probably smaller companies. You’re going to penny pinch and figure out how to operate lean rather than spend a lot to hire a ton of staff to get your footing. But size shouldn’t deter you from going global. You just need to have a lean philosophy. In the realm of payments, that’s where automation has a big benefit. Partner payments has traditionally been solved by bringing people in to do it. It takes a lot of effort to collect the information from partners to make them payable. Then that team of people are asked to manage the various payment accounts (wires, ach, paypal, check) and at the end of the month, roll it all back up into a ledger. And being lean, especially when it comes to partner processes like payments, benefits domestic partners as well. If you’ve optimized the effort to buy from you, you need to optimize the effort to sellers. And the key to operating lean is finding specific ways to automate. In e-commerce they have a philosophy that for every dollar you put into automation, you get $10 of return. It really is the difference between taking a bunch of people on an elevator or having everyone walk up the stairs. If you’re going up one flight, it’s not a big deal, but if you aspire to get up 20 to 30 flights (which your investors probably would like to see), you need a faster, more streamlined way up that doesn’t leave everyone tired and sweaty.
- Does anyone remember Wall-E? In the movie, Wall-E was stuck on a dystopic Earth where he was programmed to sort garbage. He had tons of garbage to sift through and categorize. That’s kind of like deciding how to pay a global partner. You have to classify each one and figure out how best to send them their money. It’s really easy to make a mistake. For example, electronic remittance and banking in Bangladesh is horrific. As it is in Vietnam or Turkey or Indonesia or just about any place that’s not part of the G10 countries. Paypal works in some countries, but it’s not the best for others. Even in Israel, did you know that they prefer to have US currency and US PayPal accounts instead of an Israeli one? It’s complicated. It’s not a job meant for a human being. It’s a job for a robot. At Tipalti, we’ve identified over 26,000 payment remittance rules that span everything from the country and payment methods. And you want to be accurate. A misplaced decimal or zero can mean you’ve sent out $10,000 instead of $1,000. But payment errors are a big issue. Let’s say your partner base is 1,000 people that you pay every month and you have a 2% error rate. That’s 20 errors per month. If you’re spending an hour to investigate and fix those errors, that can add up. An FTE at $60K dealing with this will amount to over half their salary. So you need cross-border payment intelligence that truly understands how to get funds from you to all the various partners all over the globe.
- Automation also happens on the partner side. If you’re still onboarding partners through email or other manual methods, scalability is going to be elusive. And for partners in other countries, it can be frustrating and insecure. That’s where a branded partner portal comes in. First, why branded? Not only does it associate the partner process with the brand, it provides a level of trust. For cross-border partners, they want to make sure you’re a legitimate business. A comprehensive partner portal is part of that experience. The portal offers a way to standardize input and it puts the data entry tasks on the partner, not your staff. This is especially important when it’s time to enter payment details. You’ll want to ask the country for the partner, then present them with payment options that might work for them. Remember the 26,000 payment rules I mentioned in the last slide? Your portal needs to incorporate those rules to ensure that payment details like PayPal addresses or bank routing information are asked. The portal can also be the way to capture invoices or tax details. More on tax later. Portals are 24x7. For global partners, it means they can provide their information whenever they want. More importantly, the portal acts as a two-way communication method. ”Where’s my payment” is the most common inquiry businesses get and with the portal connected to payment data, none of your staff ever need to answer the phone or respond to emails or twitter DMs. Instead partners can log in and view the payment status whenever they want. Portals can also be localized so that language barriers can be overcome. That’s not so easy to do over email.
- I mentioned partner tax data collection in the last slide. We’re talking W-9 forms, but we’re also talking about the lesser known W-8 Series forms and VAT IDs. In fact, the IRS is getting very serious about trying to collect taxes. The Foreign Account Tax Compliance Act or FATCA is all about attempting to collect from offshore tax shelters. While it may seem a million miles away from crowdsourcing and online marketplace partners, it’s not. Because if you don’t collect adequate forms from your partners, the IRS has to make an assumption that they are not exempt. In theory that means they can assert a penalty. And the penalty isn’t on the payee. It’s on the payer, and it can be up to 30% of the transaction. That means a $5,000 payment to a partner who you didn’t collect proper tax documentation for is liable to be a $1500 fine on you. And of course, if the IRS is auditing your partners, they may start to find other areas of the business they need to look into. So by all means, get and verify partner tax details during onboarding. Don’t wait until the end of the year when that partner may have moved or maybe stopped working with you. Make it part of the process. We had one customer who was operating a creative asset marketplace and they were at risk for nearly $120,000 in fines. Suffice to say, it’s cheaper to be in compliance than not.
- The image in the background is a click farm. At Tipalti, we block nearly 1% of all PayPal transactions because of a fraud hit. Sending funds across borders is no joke. If you remit to a bad actor, there is little to no recourse. You might as well just eat the cost. The risks are higher globally, but not insurmountable. At a minimum, payments should be checked against international blacklists like OFAC in the US or OFSI in the UK. Those are known money-launders, terrorists, cyber criminals, and sanctioned individuals and organizations. That’s actually a legal obligation. You can get fined or suspended by the US Treasury if you don’t. They could shut down your entire business by locking up your bank account. Even in the US, we’ve blocked over 140 transactions in a year. That might not seem like a lot, but if the average amount is $2,500 that’s $350k in the US alone. And it’s not enough to check a payee during onboarding. Sometimes, a criminal will “soften you” by being legitimate for a few payment cycles before they commit fraud. So we recommend checking for fraud with every payment. Payees will register with similar names, addresses, emails. They’ll also employ bots or register from the same IP addresses. Those should be red flags and be put on hold until you can ascertain their legality. You can also use tax IDs as another method for knowing your partner. Particularly for international partners, they’ll likely be required to provide more extensive documentation than a social security number or employer identification number. No defense is perfect, but you can plug the obvious holes.
- Because of our unique holistic approach, we have hundreds of customers, from fast-growing startups to established companies across various industries, that benefit from Tipalti. We have many resources dedicated to get you up and running quickly and to assist as you encounter new needs as your business grows. The ongoing support our clients receive and the breadth of our offering is why we 98% customer satisfaction. We scale and grow with your evolving needs.