Reimagine Payouts—From Checks to Tech
It’s my year-end ritual to research future trends at the start of a new year. During my recent exploration, I came across a DSA trend report from 2016. It’s interesting to compare where the direct selling industry was five years ago as a way to frame 2021 trends, the acceleration of change we are experiencing, and what direct selling organizations are doing to remain competitive.
In 2016, direct selling was positioned to enhance the in-person shopping experience and convert new customers through personal experiences. To support this strategy, DSA reported 68 percent of Americans (2016) reported they didn’t like shopping online because they couldn’t see, touch, or try on what they were buying. Direct selling companies set out to foster this market need for high-touch and intimacy.
Over the past five years, we have seen a radical shift in consumer behavior driven by a number of factors, including demographic shifts that prefer online shopping, accelerated in response to the 2020 pandemic crisis that restricted retail and in-person interactions. The increased need for online transactions has forced the direct selling experience online and accelerated the use of digital tools such as affiliate portals, digital shopping carts, and replicated websites.
2. Workforce trends
Remarkably in the same report, the 2016 discussion still centered around baby boomers. DSA reported that with greater interest in creative second careers, direct selling companies could attract the growing boomer segment with unique propositions that fit their post-retirement lifestyle: 74 percent of boomers reported they wanted the ability to work on and off when they want after they retire. Younger distributors were a secondary population. Though it was noted that direct selling companies needed to appeal to a more idealistic younger workforce, leveraging values as a form of attraction and retention, it was a future trend. Other needs of this population were not mentioned.
In 2021, the direct selling focus is squarely on recruiting millennial distributors and customers into the brand, as the largest workforce pool of talent, and to capture the longer customer lifetime value of a younger population. Smart DSOs recognize that millennials have an entirely different mindset when it comes to work and payout expectations. They grew up in the instant-everything gig economy and can be choosy when it comes to how and when they work. Many companies have been slower to convert legacy systems and marketing efforts to attract the new workforce. In order to remain competitive, these DSOs will need to accelerate the adoption of new systems and processes, to attract and retain brand loyalists, and catch up to the competition made up of early adopting market leaders and start-ups who are already using new digital systems, processes, and instant commission payouts.
3. Future of Payouts
There were at least five notable payment trends reported by a BAI Q insights article in 2016 that have continued through 2020 and will accelerate through 2021.
Q insights, Nasreen Quibria reported that 2015 and 2016 were transformative years that saw the rise of fintech’s disruptive technologies go mainstream, competing directly with the traditional financial services industry. We saw a surprising number of mobile wallet launches and announcements to compete with Apple Pay (Android Pay, Samsung Pay, Walmart Pay, Chase Pay, LG Pay, etc.) and continued interest in blockchain technologies such as Bitcoin. The industry saw greater adoption of point-of-sale systems that accept mobile payments, more linked loyalty programs, and natural extensions into in-app purchases and peer-to-peer transactions. This positioned digital and mobile payments for the rapid adoption rate we saw through 2020. Worldpay FIS 2020 Global Payments Report predicts that digital/mobile wallet transactions will be over 52 percent of all transactions globally by 2023. This trend will accelerate within the direct selling industry in 2021 as legacy organizations catch up with moving from checks to tech to compete, attract, and retain distributors and customers.
The Q insights report projected, and today we are seeing more retailers, tech companies, banks and yes, DSOs offering their own branded mobile wallet systems through companies such as PayQuicker.
4. Blockchain Unleashed
Five years ago, attitudes at companies and financial institutions were cautious about cryptocurrency due to fluctuating valuations and illicit activities.
Interest is accelerating at the end of 2020 driven by asset and fund managers at major institutions approving digital asset buys. We see several DSOs in this vertical and expect interest to continue into 2021.
5. Demand for Faster Payments
Faster payments initiatives were focused on same day ACH via U.S. NACHA and obtaining real-time payments systems via The Clearing House, VocaLink and FIS in 2016. The demand for instant communication, feedback, and search results created millennial expectations of high-speed access in every part of their lives, including commission payouts.
To make and receive payments quickly is now a market requirement for digitally savvy millennials. Payout frequency is also an accelerating trend that keeps distributors engaged and motivated to grow their business and, in turn, grow the direct selling organization’s business. This is also a global requirement, and countries around the world have launched major programs to enable these real-time payments, immediate payments, and instant payments to support the demand.
6. Trend to Fortify Security
The staggering number of high-profile data breaches from 2015 through 2020 continues to fuel the need for direct selling organizations to invest in the highest levels of data security available in 2021 and beyond. We also see the trend to outsource the handing of sensitive data collection and storage to third party providers who specialize and are experts in security and compliance. In 2021, as spending on cybersecurity continues to soar at direct selling companies and financial institutions work to deploy added layers of security to protect against vulnerabilities to reduce the risk of data breaches, direct selling organizations will be looking for turnkey payout solutions that collect and store sensitive social identification numbers, tax forms, or banking information within specialized secure environments to relieve the growing burden.
7. Digital Platform Design and Data Optimization
Even before 2015, new interconnected devices and technology forced companies to reengineer their businesses for optimization on digital platforms. Over the past five years, companies have been focusing on establishing consistent digital channels across the internet, mobile devices, and tablets. Plug and play, open-source application program interfaces (APIs) were projected to play a significant role as part of banking and program offerings. APIs will continue to play a significant role in 2021 and long into the future. Innovative fintech organizations will continue to create a richer and more dynamic product and user experiences across these integrated platforms. Consumers will continue to win in 2021, being offered more meaningful information based on data, insights, and analytics that are provided through their interactions and device integrations.
The trends reported in 2016 by DSA and others were surprisingly accurate, and as we kick-off 2021, most trends are still relevant and even accelerating. Direct selling organizations that keep up with important consumer and market requirements such as shopping trends, workforce needs, increased payout speed and frequency, data security and compliance requirements, and digital design and optimization will be better able to meet the needs of their consumers and affiliates, and successfully compete and win in a rapidly changing market.
Karen Dworaczyk is the Chief Revenue Officer at PayQuicker. PayQuicker is a leading provider of financial technology and innovation for direct sales organizations. Their cloud-based, regulatory-compliant, secure software stack offers custom-branded payout solutions that power their clients to seamlessly deliver secure, instant payouts to millions of independent contractors, distributors, influencers, and affiliates around the globe.