6 Key Trends Driving Demand to Reimagine Payouts from Checks to Tech
There are several key market requirements direct selling management teams need to know to support a case for innovation in their commission payout systems and processes, and turn their payout plan into a competitive advantage in 2021:
- Online Experiences: The increased need for online transactions has forced the direct selling experience online and accelerated our clients’ use of digital tools and dynamic online user experiences, such as affiliate portals, digital shopping carts, and replicated websites.
- Younger Workforce: Increase demand for instant commission payouts and flexible spend options, driven by tech-savvy millennials and gen Z population, continues to influence workforce attraction, retention, and satisfaction.
- Speed: Direct selling reps demand an increase in payout frequency that is fast, frictionless, and can keep up with their independent business velocities.
- Security: Increased data security requirements and the rise in criminal cyber-attacks drive direct selling companies to partner with third-party payout providers with experience and proven expertise in security and compliance to avoid and manage risk of costly breaches of sensitive personal data.
- Rise of Integrated Digital Platforms: Direct selling companies either have, or are moving to, upgraded back office systems that are capable of easy API integration with third-party providers, streamlining administration and resulting in operational efficiencies.
As an established payout provider for direct selling organizations, PayQuicker is in a unique position to guide direct selling companies through payout trends and important considerations that will help you transition from slow, inefficient legacy payout methods, to a secure, compliant payout technology that meets the needs of your staff and demands from your reps.
6 Key Trends in the Direct Selling Industry
Like many, it’s my annual ritual to research future industry trends at the start of a new year. During my recent exploration, I reread the DSA Trend Report from 2016 along with other research cited. It is 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 how direct selling organizations are reimagining their commission payout architecture to remain competitive.
Here are some notable actions our clients have taken to achieve continued marketplace success throughout 2020 and the trends predicted to accelerate into 2021.
1. Direct Selling Experience Moving Online
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% of Americans 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. In 2019, Statistica reported retail e-commerce online sales worldwide are forecast to more than double between 2018 and 2023, surpassing 6.5 trillion U.S. dollars in 2023.
The increased need for online transactions has forced the direct selling experience online and accelerated our clients’ use of digital tools, such as affiliate portals, branded wallets, digital shopping carts, and replicated websites.
2. Younger Workforce
Remarkably, in the same report, the 2016 discussion centered around baby boomers. DSA reported thatwith greater interest in creative second careers, direct selling companies could attract the growing boomer segment with unique propositions that fit their post-retirement lifestyle. According to the study, 74% of boomers reported they wanted the ability to work on and off when after they retire. Younger distributors were a secondary population mentioned in the survey. 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, our direct selling clients’ focus is squarely on recruiting millennial and gen Z 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 direct selling companies recognize that millennials have a different mindset when it comes to work and payout expectations. Millennials grew up in the instant-everything gig economy and can be choosy when it comes to how and when they work.
Many companies, however, have been slower to convert legacy systems and marketing efforts to attract the new workforce. In order to remain competitive, these direct selling companies will need to accelerate the adoption of new systems and processes, to attract and retain younger brand loyalists, and catch up to the competition made up of early adopting market leaders and start-ups who launch using new digital systems, processes, and instant commission payouts.
3. Future of Payouts
There were several notable payment trends, reported by a BAI Q insights article in 2016, that 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, Walmart Pay, Chase Pay, LG Pay, etc.) and continued interest in blockchain technologies. 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 payouts for the rapid adoption rate PayQuicker saw through record new clients in 2020. Worldpay FIS 2020 Global Payments Report predicts that digital/mobile wallet transactions will be over 52% of all transactions globally by 2023. This trend will accelerate within the direct selling industry in 2021 as legacy organizations catch up by 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, direct selling companies offering their own branded mobile wallet systems through companies, such as PayQuicker.
4. 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 banking and 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. Note, 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.
During a recent client meeting that included members of the company’s sales leaders, I was able to hear first-hand how effective increasing payout frequency is at increasing motivation, engagement, and company and brand loyalty. Our client, a large enterprise direct selling organization, implemented our instant pay, instant spend payout solution providing on-demand payouts (multiple times each day) to their sales force in 2019. At this VOC (voice of the customer) meeting, team members enthusiastically voiced their reactions to the change to daily payouts and payout notifications. Here are some examples of their testimony to the power of instant gratification: “Sweet! I just got paid again”, “Every day I get multiple payout notifications from the sales by my downline sales teams, and it reminds me how my company is working hard for me!”, “When I get distracted or busy with regular life, the notifications keep me focused on growing my business on a daily basis!”, “It’s an incentive and keeps me engaged!”, “Love it!”.
Over 63% of PayQuicker clients are now paying distributors weekly, daily, or on-demand (multiple times a day), while only 37% pay monthly or twice a month. If direct selling organizations are still using slower, legacy methods and paying less frequently, they are vulnerable to losing top performers and may lose out on attracting top producers.
5. 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. The 2019 Cost of Data Breach Report from Ponemon Institute and IBM Security stated the global average cost of a data breach has grown by 12 percent in the last five years to $3.92 million. The increase was driven by the multi-year financial impact of data breaches, increased regulation around data security and privacy, and the difficult process of analyzing and resolving cyber-attacks. The United States had the highest cost at $8.19 million with healthcare posting the highest average industry cost of $6.45 million due to the high amount of personal data stored in their systems.
Large organizations with more than 25,000 employees had an average cost of a data breach of $5.11 million or $204 per employee. Little known is that small businesses such as startups and new growing companies experience more than 10 times higher costs proportionally than their larger competition. Companies with 500-1,000 employees had an average breach cost of $2.65 million or $3,533 per employee.
Companies of all sizes should take the risk seriously and we are seeing our direct selling clients respond to the threat. One option our clients take advantage of is an industry trend to outsource the handing of sensitive data collection and storage to third party payout 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 ecosystems to relieve the growing burden. Security is stated as a top reason enterprise clients choose PayQuicker. PayQuicker gathers and stores sensitive personal data such as social identification numbers and personal bank transfer information in our high security PCI level 1 compliant platform that is SOC 1, type 2 audited as required by our regulators and banking partners, relieving our clients of the risk.
6. 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 their back-office systems, 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 payout program offerings.
Currently, over 60% of PayQuicker DSO clients have integrated their branded payout solution directly to their back-office software. APIs will continue to play a significant role in 2021 and beyond as third-party service providers will continue to create and offer richer and more dynamic product and user experiences across these integrated platforms. Organizations who adopt API integrated systems will streamline what used to be slow, costly manual processes for workflow, information flow, and decision flow. The result will be positive productivity in terms of speed, efficiency, and financial impact. Consumers will also 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 accelerating. Direct selling organizations that keep up with important consumer and market requirements such as online shopping and payout 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.
PayQuicker is a leading provider of financial payout technology and innovation for direct sales organizations. Our cloud-based, regulatory-compliant, secure software stack offers custom-branded payout solutions that power our clients to seamlessly deliver secure, instant payouts to millions of independent contractors, distributors, influencers, and affiliates around the globe. The instant payout of commissions, bonuses, incentives, and rewards is critically important for our clients to build brand loyalty and accelerate their business growth worldwide through secure affiliate portals, wallet solutions, or API gateway integrations with their proprietary user interface.
 2016 DSA Trend Report in Partnership with GfK Consumer Life (Roper Reports®)
 2016 DSA Trend Report in Partnership with GfK Consumer Life (Roper Reports®)
 Nasreen Quibria, Q insights Feb 8, 2016, published for BAI Chicago