An editor completes a job for a client in LA, California. A journalist from Nairobi receives a San Francisco based platform’s payout for subscribers. A voice actor is performing in Buenos Aires for a voice studio in Berlin. None of these persons are traditionally employed. Each of them sits awaiting a payout line which often wasn’t intended for them. This is the reality of cross-border payouts in the creator economy today.
A “Massive” Market Built for Cross-Border Payouts on Infrastructure Not Designed for It
The creator and freelancer economy has now reached hundreds of millions of people, harnessed in various platforms, marketplaces and direct client relationships across dozens of countries. However, the infrastructure built for cross-border payouts under most of these is geared towards the older system, which was that there were only a few big corporate payees, who were paid monthly, and who mostly spoke a small number of major currencies.
This mismatch is seen continually. Even before a creator gets their money into their local bank, between 5-8% could be taken off by conversion spreads and wire fees from a platform based in the US. Payments can come fast and furious, and may be paid on a day that doesn’t coincide with the banking day or holiday in the country that will receive the payment. But often there is no support, as the platform that has creators in ninety countries simply cannot have a local support person for each of the various nuances of local payment systems.
What Makes This Different From the Traditional Payroll Process?
While often confused with standard international transactions, managing cross-border payouts has significant differences compared to traditional payroll. Payroll is consistent and predictable same people, same money, same time, every month. The other way around is the creator and freelancer payouts. There’s no consistent pattern to volume surges around posts with viral content or around project deadlines; payees come and go all the time; and payouts can range from a few dollars to tens of thousands of dollars in the same batch run.
Such variability disrupts payment systems that are based on consistent and predictable volumes. A payout system designed for creators must support a long tail distribution of small, frequent payments as well as big payments from time to time, without either thriving or squeezing out the profits.
The Friction Points That Actually Drive Churn
Any platform handling cross-border payouts will eventually face these exact grievances from users. Content opportunity doesn’t dry up, creators just quit because it started to hurt more to get paid than it did to work. It’s a lesson learned when a payout is made five business days late, in a currency that has depreciated over that amount of time, and a fee has been deducted from that amount as well.
In this market, this is much more important than in any other market, since the creators and freelancers are not bound to any one platform. Whereas if you’re employed and you’re having problems with the payroll, you can’t just go somewhere else, a freelancer on a marketplace can just go to another project. These platforms don’t have an after-thought payout experience; it’s a retention tool that they know has a direct measurable impact on creators’ return.
Here’s What a Modern Payout Stack Looks Like
There are a number of similarities between the platforms that are doing the right thing. As opposed to a black box between “processing” and “sent,” they provide visibility of where payout is at at every step. Settle into local rails, like mobile money in parts of Africa, UPI in India and PIX in Brazil, rather than having to pass every payment through a generic international wire that is paid out at a rate of days. They reveal the FX rate at which they will sell the money, and they reveal the fee that they’ll charge, upfront you don’t find out the spread when the money hits you, because that’s actually their rate.
The actual need is for a payout infrastructure that can support massive amounts of payees, whether they’re handling a variety of currencies, local rails, or compliance standards, and have them all supported without having to design and maintain any of that complexity on the platform. There are not many payment companies that are content, community or marketplace businesses.
The Remaining Steps in the Process
With the creator economy expanding into new territories like Southeast Asia, Sub-Saharan Africa and Latin America, where creators are growing at a fast pace, it won’t be the platforms that have the best content tools that will win. They will be the ones that experience the pay-out process just as quick and easy as platform creators do for receiving their payouts locally.
Being born into a generation that has never known a world without instant payments between peers, it doesn’t feel like normal to have to wait five days to get paid for an international wire that charges a hidden fee. It’s not a nice to have to fix that. It’s the standard creators are expecting before they sign up for a platform for the long term.
