Paying independent contractors
The US economy’s makeup has shifted significantly over the last decade as more individuals have opted to work as independent contractors, commonly known as freelancers, in various marketplaces.
According to Gallup, independent contractors roughly account for 36% of the US workforce as of 2018. Additionally, independent contractors accounted for $1.2T in commerce and have consistently outpaced employee hiring for small and medium-sized businesses, according to PayChex. While freelancers have become a new facet of the modern economy, too many companies lack the tools necessary to manage their financial needs efficiently.
Payment limits, sending checks, and tax reporting, oh my!
A company recently built a business with independent contractors who receive payments based on the volume of text messages generated for mobile advertising. Unfortunately, the business continually runs into two significant challenges with a large incumbent provider in the space.
First, every payment cycle hits a static, single-payout transaction cap. Some of the company’s highest-performing users cannot receive a bank transfer, falling back to receiving a physical check instead. The owners and book-keeper feel the strain to manage physical items going out, accounting for several hours every other week, despite repeated requests to increase the transaction limit.
Secondly, the business paid a few thousand users over the $600 requirement needed to generate 1099 to both the IRS and independent contractors. Unfortunately, the incumbent offered no tax reporting capabilities, merely payout services.
While this business could use another third-party provider to solve tax reporting, they sought a solution that combined payout processing and tax reporting while ensuring they weren’t responsible for user bank data. There are many useful third-party ACH providers out there, but this customer needed a dynamic technology platform that facilitates financial experiences beyond basic processing.
With our architecture, expanding Moov.js to support a Proof-of-Authorization flow for collections, adding additional payment or user data, or integrating a real-time account verification solution can be easily accomplished. Customers can reap the benefits of hosted products if they are keen to get to market quickly or build to our APIs and own the full UI experience.
Beyond the payout
Most people would prefer to go to the dentist or speak in public than deal with text-based files, SFTP infrastructures, or sign up for another business bank account. However, when considering a new product, the expectations are high. Payment processing should include a beautiful dashboard, reporting, built-in compliance services, an SLA, JSON-to-file transformations, OFAC and sanction screening, exception processing, and other essential functions. Orchestrating payment processing at scale means owning the end-to-end flow so your customer can scale, and in some ways, risk their business on your platform. But that’s not enough.
This customer’s value in leveraging Moov was the combination of a robust, hosted service that passed the sniff test of basic processing requirements while not forcing them to take on sensitive PII data nor leverage another point solution for tax reporting.
Our customers can focus on scaling their business, leaving the boring but mission-critical parts of their business to Moov.
We are humbled and excited to serve businesses like this and hopefully many more like them.