What are payouts and who needs them?

Processing payouts manually can quickly become a distraction for high-growth online merchants. Find out how payout solutions help e-commerce businesses, and when to consider investing in one.

Financial management is an essential aspect of any business – especially when it comes to e-commerce. One of the key elements is processing payouts, including payments to vendors, customers, and employees. 

 

Some online merchants choose to process payouts manually. For a small startup this may work in the beginning – but as business grows, so does the accounting admin. Before many merchants know it, they’re spending valuable time staying on top of outgoing payments that should be spent bringing in new customers.

 

Fortunately there’s an alternative to this approach that is gaining traction among high-growth online businesses. Tech-driven payout solutions enable companies to easily process payments, delivering a great experience to all stakeholders – while keeping freeing up more time for online merchants to focus on growing their business.

 

Just as all companies should understand the importance of implementing the right global payment solution for handling incoming revenue on the demand side of the business, payouts are equally important for the supply side.

 

This article explores the importance of payout solutions for high-growth businesses, and takes a closer look at who typically uses payouts as well as who can benefit from there. Keep on reading for a detailed overview of payouts.

 

 

Table of Contents

What are payouts in e-commerce? Definition and examples

How businesses use payout solutions

Why is a good payout solution important for businesses?

What to expect from a payout solution?

Which businesses need payouts? 5 critical use cases

Summary: Why online merchants should consider a payout solution 

Payouts overview article cover image PayU

What are payouts in e-commerce? Definition and examples

Payouts are payments made by a business to various stakeholders, including customers, employees, suppliers, and contractors. Most companies make payouts either in cash or use various other methods available in their country.

 

For example, a company may use one of the following techniques:

 

  • Bank transfers 
  • Cash payouts 
  • Payouts to wallets  
  • Payouts to issued debit or prepaid cards 

How businesses use payout solutions

A good payout solution allows merchants to cover the entire range of payout-related use cases such as:

 

  • Paying sub-merchants in marketplace business models 
  • Paying suppliers in the retail or service industry
  • Charity payouts
  • Sending payouts to any type of company with a relationship with the merchant as a customer, employee, or supplier

Why is a good payout solution important for business?

Almost every business faces interruptions while making payments to its vendors or customers. A significant delay in payouts may lead to customer drop-off and interrupted service. A merchant can have multiple payout methods, not only those related to bank accounts. This is especially in countries in which the percentage of people who use banking services is low. Having alternatives to payout in other mechanisms such as cash or wallets is important. 

 

Also, moving funds across borders may be riddled with challenges related to time, cost, and regulatory restrictions. A good payout solution should solve this.

 

Some common issues connected to payout systems include:

 

  • Inability to process payouts during non-banking hours
  • Complexity and effort around making bulk payments
  • Troublesome verification of a bank account’s validity
  • Restrictions on bulk payouts 
  • Lack of error tracking capabilities that help to detect and solve payout failures
  • Complexity around reconciliation of refunds or transaction failures

 

By equipping their business with a solid payouts solution, merchants can address these issues and ensure timely payouts for their key stakeholders.

What to expect from a payout solution

What kind of features should merchants expect to find a high-quality payouts solution? Here are a few key functionalities to help you pick the right tool for the job:

 

  • The ability to easily send payouts to multiple countries 
  • Sending real-time payouts to third-party providers
  • An API solution that helps to automate internal processes to pay without operational burden
  • Top-class customer support and integration to solve issues faster
  • Option to manage one or multiple payout requests easily, quickly, and securely
  • Ability to customize the payout experience using diverse functionalities to offer the payees their preferred payout methods in their local currencies
  • Built-in compliance management specific to each country
  • Sending multiple and secure payouts such as fund disbursement to employees, sub-merchants, suppliers or customers

 

 

Additional payout features

As e-commerce is global by nature and business needs are always evolving, a good payout solution should also be flexible, with the capability to cover diverse needs, use cases, and industries. Some examples might include:

 

  • Sending payouts to cards with funds available to payees within minutes
  • Sending payouts to bank accounts using local clearing methods
  • Managing outgoing transactions to your customers, suppliers, service providers, sellers, and even employees
  • Disbursing funds easily, quickly, and securely
  • The ability to partner with a local presence to enter markets without legal burden and integration efforts
Understanding payouts infographic PayU

Which businesses need payouts? 5 critical use cases

Gig economy

Gig economy merchants mainly disburse through bank accounts and require payout methods that allow for paying suppliers instantly. 

 

A good payout solution should allow gig economy businesses to disburse money locally and, ideally, should also come with cross-border payments functionality. 

 

The real-time nature of payouts is another important goal that merchants can achieve through automation. An API-based payout solution (such as that offered by PayU) helps to automate the internal payout process, so businesses can pay without operational burden, delivering a great customer experience. 

 

 

Crypto exchanges

Businesses in the crypto space typically use ACH bank transfers for local disbursement and SWIFT or wire transfers for anything cross-border. Therefore, an inability to process payouts instantly creates an immediate risk due to exchange rate fluctuation and high operational volumes. Lack of automation with banks can lead to higher costs as well.

 

A crypto exchange needs a 24/7, real-time payouts solution to pay investors faster and avoid exchange risk. 

 

This is again where an API helps a lot by automating the payout process and reducing the operational burden for the merchant. 

 

 

Marketplaces

In a marketplace business, a payouts solution helps merchants scale in different countries and be cost-efficient by paying local-to-local and cross-border-to-local faster.  

 

Merchants need detailed payout information to split the payment between the marketplace and the seller. They usually aim to pay sellers in real-time with well-known payout methods in the local currency. 

 

A modern API payout solution is again useful when it comes to helping marketplaces easily scale their operations in different markets. This should allow them to issue payouts locally in different countries and currencies without any integration burden. 

 

 

Multi-level marketing (MLM)

MLM merchants often disburse funds locally through bank portals. Traditionally, this comes with an operational burden and takes more time for the third party to receive the payout.

 

Merchants in the MLM space could therefore also benefit from a real-time payout solution – as well as a more efficient and automated process to pay dealers faster and ease their operational burden. 

 

 

Refunds for retailers and payment providers

E-commerce merchants offering alternative payment methods (APMs) and card payments to their customers need to refund money easily. But the process from most card issuers is often slow and delivers a poor experience to payers. Furthermore, when paying through some alternative payment methods (APMs), a refund option is not possible. 

 

To solve this issue, retailers and payment providers need a real-time payout solution that enables refunds and also allows merchants to process payouts in new markets easily.

PayU payout solutions large graphic

Summary: Why online merchants should consider a payout solution

Payouts are the backbone of smooth business operations. With advanced payment technologies available, merchants can easily simplify and automate payouts to drive greater business results. 

 

Building a quick and hassle-free payout management process with a global payment provider is the best thing merchants can do to ensure smooth payouts that always reach their recipients on time.

 

A high-quality, real-time payout solution is a must-have for every company looking to make payouts as cost-efficient and fast as possible – especially when the business is operating across borders. Modern payout solutions come with APIs that help to automate internal processes so that merchants can pay without operational burden.

 

Combined with outstanding customer support and integration, a quality payout platform helps businesses to achieve their goals, solve issues faster, and reach new heights.

 

Reach out to our team to learn more about PayU’s payout solutions – and how they can benefit your business.

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