Thought Leadership

3 Big Trends Across the Pay-In/Pay-Out Paradigm

TL;DRBoth sides of the pay-in/pay-out paradigm—companies that accept payments and companies that send them—are seeing significant developments across three elements of their business models: global expansion, user experience, and operational efficiency.

Payments—whether we’re talking about online payment acceptance, or peer-to-peer mobile payments, or outbound payments like the ones we handle at Hyperwallet—have always been complex. (Or, at least since we decided there had to be a better way to transact than carrying around purses of gold florins.) Broadly speaking, that complexity has only increased over time. The worldwide economy has become more closely knit, and—consequently—the regulatory environment has tightened. In order to participate, global businesses have had to establish and maintain countless financial entities, agreements, and relationships.

But trends can—and do—change. Recent years have seen the emergence of payment platforms that consolidate many financial processes under a single integration. Tokenization allows companies to utilize payment technologies without taking on that additional workload or risk. Payment providers shoulder much of the regulatory burden. Complexities have been simplified.

In payments, these kinds of trends have a way of simultaneously impacting both sides of the pay-in/pay-out paradigm—that is, both companies that accept payments and companies that distribute them. Today, we can point to changes in the outbound payment space, then look around and see similar things happening in merchant acquiring. Nothing happens in a vacuum.

Here are some of the major trends across three key elements of the pay-in/pay-out paradigm: global expansion, user experience, and operational efficiency.

#1 – Removing Financial Risk in Global Expansion

Many of the business models that Hyperwallet works with—ecommerce and on-demand platforms, direct and social selling companies, and so on—rely on the network effect, which means that it can be challenging to achieve the necessary economies of scale without an international footprint. The battleground for these kinds of two-sided marketplaces has gone global, yet consumers and suppliers have come to expect a localized payment experience. As a result, outdated payment mechanisms that don’t offer the right combination of speed, optionality, and affordability can put companies at a serious disadvantage.

The battleground for two-sided #marketplaces has gone global, yet consumers and suppliers have come to expect a localized #payment experience. Click To Tweet

Traditionally, companies have been forced to use expensive cross-border payment methods when initially expanding into a new territory. With a modern payment provider, though, marketplaces can offer localized payments from day one.

Rather than investing in costly financial infrastructure upfront, many companies today are leaning on both inbound and outbound payment partners to first test the viability of new international markets. This starts with presentment—using a platform’s capabilities to present consumers with a local payment experience from another country. If the market demonstrates sufficient volume, companies can evaluate their margins to decide whether it makes more sense to establish their own local entities or to maintain the status quo. Ultimately, presentment through payment platforms gives organizations an opportunity to gauge their expansion opportunities while minimizing their exposure.

# 2- Attracting Users through the Payment Experience

Until recently, it was difficult for companies to create a unique payment experience with the tools available. Most used the same payment types (generally checks or bank deposits) and paid out on similar schedules. Uber and Lyft, for example, both started by paying drivers via direct deposit on seven-day cycles—that is, until they recognized they could better attract and retain users by using improved payment options as incentives. The reality is that the payment experience is central to achieving positive platform economics.

Developments in specific payment technologies are driving new expectations across all financial processes in what we might call the ‘Venmo effect.’ The result is a consumer base that wants faster payments, more options, easier access, and lower costs. Companies are increasingly turning to payment providers that can address the needs of their users and provide unique competitive advantages.

The 'Venmo effect' means that consumers want faster #payments, more options, easier access, and lower costs. Click To Tweet

Of course, the experience on payment platforms isn’t strictly determined by payments. Would-be users can find the onboarding process too complex, or too invasive, and abandon during registration. Onboarding is the first chance to establish user loyalty, and it’s important that organizations partner with inbound and outbound payment providers that can make a great early impression.

#3 – Centralizing and Streamlining the Payment Process

Even today, some companies still endeavor to tackle payments on their own, perhaps without fully recognizing all of the financial and administrative resources that are required. Reconciliation, chargebacks, customer support, foreign exchange, delivery tracking—the list of operational considerations is long, and managing an in-house payment process only becomes more difficult as the organization scales.

The trend, though, is in the other direction. Rather than cobbling together a mishmash of payment capabilities in order to reach all payees (as has historically been the norm), most companies are opting for single, integrated solutions. It’s all about centralizing and streamlining their payment processes, and the result is less manual oversight of funds and greater operational agility. Look for this trend to continue as pay-in/pay-out becomes unified as a single payment flow.

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