The race for faster payouts & role of contractor wallets

With strong competition for talent, online marketplaces are looking for new ways to attract and retain their workforce around the world. These organizations rely on contractors, sellers, and freelancers to propel their business forward and deliver to their customers. But these critical individuals are sometimes left wondering: how long will it be before pay day?

According to a recent study by PYMNTS, 58 percent of global contract, freelance, and gig workers believe the current payment infrastructure is insufficient due to high fees, slow payments and currency conversion issues. One third reported waiting three to five days to get paid, while 15 percent experienced delays of more than five days. However, there’s growing evidence that this pool of talent is apt to decide who they work with based on the speed of payouts, and may even be willing to pay for instant access to their earned wages.

Contractors are already familiar with the wallet-to-wallet transfer capabilities of providers like PayPal and Venmo. Unlike open-loop systems, which route payments and settlements between multiple providers (e.g., card networks, banks, etc.), such closed-loop systems can enable transactions to happen in near real-time. However, to optimize worker payouts, organizations need to ensure there’s ownership and control over the flow of funds.

Instant access, wallet-to-wallet

One path to faster, more seamless payouts is by integrating contractor wallets into existing workflows. Each contractor creates a wallet or account with the marketplace, connecting all parties to one Payments Ecosystem on a single digital ledger. Funds can then flow from the marketplace’s wallet to the contractor’s wallet within that ecosystem, rather than from bank-to-bank.

This brings significant benefits, including:

• Low transaction costs: Payments are sent and received without an intermediary financial institution, reducing or eliminating transaction fees.
• Instant settlements: Funds paid from one wallet to another happens in seconds, as the flow of funds eliminates unnecessary steps, such as traveling through financial intermediaries.
• Improved visibility: With immediate awareness of payments sent and received, organizations have a clear line of sight into cash flow operations with zero latency.

Through embedded finance providers like Alviere, enterprises can enable additional features, like providing global money transfers from the contractor wallet. For example, an Airbnb Host can be paid by Airbnb for a recent stay, instantly have funds settled in their Airbnb wallet, and then send a remittance to a supplier or loved one – all within minutes and via one consistent interface.

The recent Deel announcement outlines how workers get paid the way they prefer. With the integrated capabilities of the Alviere HIVE platform, and in-house compliance expertise, our team builds financial solutions for a range of technology forward businesses. Overcoming the inertia of traditional banking systems requires the adoption of technology that addresses transaction costs, cross-border transactions, fraud, and integration into existing back-office systems. To stay ahead of the competition for talent, Payments leaders must explore how contractor wallets can deliver significant benefits now, and in years to come.