Pay Me Now: On-Demand Economy Woes Solved with Prepaid Solutions
With on-demand companies like rideshare and food delivery services continuing to pop-up everywhere, the way we get paid has largely taken a back seat to the way we pay.
From Uber, Lyft, Foodora, AirBnB, to Postmates, peer-to-peer apps are improving the way we request and pay for services, but are not addressing how workers get paid for those services in a timely and transparent manner.
While the demand side has seen exponential growth and development in terms of accessibility and accepted payments, the key issue lies largely with the supply side of the service.
How employees and contractual workers are paid out has remained stagnant, and causes great friction for both contract workers and on-demand economy businesses.
The world of incoming payments is largely being addressed by innovative companies like Stripe, PayPal, and Braintree. These services have simplified how businesses accept payments from consumers. However, the world of outgoing payments – businesses disbursing mass payments to workers or other businesses continues to be opaque, complex, and fractured. Consider how you currently get paid – direct deposits haven’t changed since the 1970s.
The challenges posed by traditional payments infrastructure are made clear by the needs of on-demand companies and workers.
Nearly forty percent of on-demand employees in the US say they get paid within the week, with 41% stating that payout occurs within the month (1).
That’s a large gap considering the services they offer are designed to be on-demand, fast, and readily accessible. And on top of the delay in payments, almost half of on-demand employees say they lose a portion of their income to their inbound payment method.
Yet, despite these payment pains, the on-demand economy continues to grow.
In Canada last year, an estimated 9.5% of the population 18+ participated in using on-demand services spending a whopping $1.31 billion (2). For an economy that can’t and won’t stop using on-demand services, you would think that paying out employees would be a higher priority. Especially if you consider that 84% of workers said they would work more if they were paid faster!
For on-demand companies, paying out workers can be costly and requires not just one solution but several, drawing from multiple third-party providers and APIs. Inevitably, multiple service agreements and integrations lead to increased costs, compromises in user experience, and inconsistent executions.
Plus, not all contract workers are the same. Workers may not have bank accounts or traditional access to banking services, which makes the potential solution of direct deposit difficult to implement. For example, 44% of on-demand workers said that their employment with on-demand services supplies 40% or more of their total income (1). On the business side, payments may be very frequent but in very small denominations, making traditional payment methods fee-intensive and cost-prohibitive.
At the end of the day, employees and contract workers face the brunt of these issues and are left to deal with unsatisfactory payout methods and timelines.
And this is where prepaid payments can help!
In many cases, the on-demand economy is growing faster than it can keep up with. As companies and services scale globally to demand, payout becomes more complex and less effective.
With revenue driven by potential to incent more work from workers, focusing on how you payout becomes key. It’s a simple give and take really. If you’re able to pay them faster, they will work more.
Now that we’ve established that we need to fix this predicament, how do we do it?
Prepaid payments can offer a multitude of solutions for on-demand economy payouts that can streamline payment methods and decrease payout delays. And yes, we know that often when people think of prepaid, they imagine single load fixed amount gift cards that you purchase at the grocery store.
But prepaid is so much more.
Cards can be physical plastic cards, virtual digital cards, stored in a mobile wallet, or further abstracted into a marketplace or mobile platform.
Prepaid cards work in the same way Mastercard or Visa debit and credit cards do, can be used anywhere in the world or online, and can be configured for ATM access.
Interestingly, prepaid payments have much greater flexibility and functionality than traditional card payments. Funds can be loaded, reloaded, or unloaded. Cards can hold multiple currency wallets, including cryptocurrencies, meaning a single card can be used to pay locally in Pesos, Euros, or USD, allowing users to avoid credit cards and their conversion rates and 2.5% international fee markups.
Payments can be restricted for use at certain merchants or merchant categories (like Hiltons, or Hotels.) Load minimums and maximums can be set. Loyalty and rewards programs can be integrated easily into the payments ecosystem. Card recipients can transfer money from the card to their bank accounts, or vice versa.
Best of all, the entire payment lifecycle can be completely branded, effectively allowing companies to brand their own money, and create their own payments platform focused around their own business needs.
This flexibility and customization of solutions can help shift your employee payout experience to a fast, positive and effective one.
While prepaid isn’t perfect for all scenarios, it certainly addresses many concerns that arise with payments in the on-demand economy. Instant issuance and API integrations allow for on-demand services to create their own rules, and ensure that payout occurs in a timely manner within a consistently branded user experience, across the globe, instantly.
So, what’s the hold up? Let’s get these workers paid.