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The creator economy is thriving, with an estimated 50 million people worldwide earning income from social media content. Goldman Sachs predicts that this economy's value could double to nearly half a trillion dollars by 2027.
Interestingly, much of this growth is happening outside the US. Payments provider Stripe reported that creator payouts are growing fastest in markets like Thailand and Brazil. Additionally, TikTok, one of the world's largest social media platforms, told Bloomberg that its ecommerce growth is being driven by Southeast Asia.
With this global success comes a significant challenge for big tech platforms: efficiently and promptly paying creators in emerging markets. Navigating complex international payment systems and ensuring regulatory compliance is no small feat.
In this article, we’ll explore some of the issues platforms face while paying gig workers, employees, and creators internationally, and discuss how stablecoins can address some of these challenges.
How Do Creators Get Paid?
Creators are the lifeblood of digital platforms, and they need reliable ways to get paid. According to Goldman Sachs, diverse payout structures are essential for the growth of the creator economy.
Today, many content and social media platforms offer creators multiple income streams, including direct branding deals, ad revenue shares, subscriptions, donations, and other direct payments from fans. For a deep dive into monetization strategies, check out this insightful case study on TikTok's payment strategy by FXC Intelligence.
Payouts: A Growth Bottleneck?
Analysis by FXC Intelligence highlights that social platforms often use methods like bank transfers and PayPal to pay creators, with payout times ranging from 1 to 60 days. International payouts to regions like Southeast Asia, Africa, and Latin America tend to be slower.
Comparing Creator Payout Methods
Despite differences in internal processes, most cross-border payments today rely on the international banking system, primarily Swift. This system, though extensive, presents significant challenges:
Slow Settlement
Swift payments to Southeast Asia can take 3-4 days, while settlements to Africa can take up to 5 days, depending on the banks involved. This delay impacts cash flow, financial planning, and exposes creators to foreign exchange risk. For gig workers, delayed payouts can jeopardize financial stability. To ensure fast settlements, fintechs and payment service providers (PSPs) often resort to prefunding, which is costly and complex. In April 2020, the FSB conducted an assessment of existing cross-border payment arrangements and identified frictions and challenges, highlighting the need for improved settlement processes.
High Fees
The involvement of multiple banks increases transaction costs, with average FX fees for regions like Southeast Asia and Africa ranging between 2% and 5%.
These challenges underscore the need for more efficient and cost-effective payment solutions to support the burgeoning creator economy.
How Can Stablecoins Resolve This Problem?
Stablecoins offer a promising alternative for creators, contractors, and freelancers to get paid quickly and reliably, regardless of their location. Here are the key benefits of using stablecoin payments:
Faster Settlement
Stablecoins operate on blockchains that function 24/7 globally, enabling near-instant settlements. This means creators can get paid immediately, reducing foreign exchange risk for businesses.
Lower Fees
Blockchains eliminate intermediaries, potentially saving businesses up to 80% on foreign exchange fees by trading on-chain.
Easy Market Access
Decentralized blockchains are inherently accessible, requiring only an internet connection and a device, making them ideal for individuals without traditional banking access.
Price Stability
Stablecoins are pegged to stable assets like the US dollar, avoiding the price volatility of other cryptocurrencies, making them more suitable for payments.
What’s the Demand for Stablecoin Payouts?
While businesses see clear advantages in offering stablecoin payouts, do employees want to be paid this way? The answer varies by age and location. A study showed that over half a billion people own digital currencies globally, with 39% preferring to be paid this way. The main reasons given were the potential for value appreciation and fast payment speeds, making it a practical and viable choice for activities that involve payments on a blockchain network. Think of it as a digital wallet that is secure, fast, and affordable, while having the usability of a fiat currency. Although market turbulence in 2022 may have reduced crypto's appeal as an investment, the benefit of fast settlements remains attractive for the way people view instant payments.
Payroll data also indicates demand for crypto payments. According to payroll provider Deel, 4% of all contractor payments withdrawn in 2022 were taken in crypto, with Bitcoin being the preferred currency, followed by USD Coin. Deel’s FY22 hiring report indicates that Latin America and EMEA countries are more inclined to accept digital currency payments, often to hedge against local currency instability or to receive payments quickly.
Emerging Markets Leading Digital Currency Adoption
Deel's hiring report suggests that more companies are looking outside of high-cost countries for quality talent, favouring emerging markets for digital currency payroll. The Global Crypto Adoption Index from Chainalysis shows that lower-middle-income (LMI) countries are leading grassroots digital currency adoption. These countries, home to 40% of the world's population, often have dynamic, growing industries and populations.
In these regions, spending in digital currencies is becoming more straightforward.
Flexibility to Offer Both Fiat and Digital Currencies is Key
For businesses new to digital currency payroll, the concept can seem daunting due to regulatory, tax, and infrastructure complexities. Moreover, demand for crypto payments varies by market and demographic.
However, experienced payroll and payment service partners can help businesses navigate these options, enabling crypto payouts in the right markets without operational or compliance burdens.
At Transfi, we believe the future of payments is multi-rail, combining digital currencies and blockchains with traditional currencies and banks. Growing businesses need flexible payroll systems to support their expansion, accommodating both fiat and digital currency payments based on local needs, preferences, and constraints. This adaptable approach ensures businesses can thrive in a rapidly evolving financial services landscape, paving the way for the future of finance.
Conclusion: Embrace the Future of Payments with Transfi
As the creator economy surges forward, the need for reliable, efficient, and cost-effective payment solutions becomes increasingly critical. The complexities of international payouts, coupled with the dynamic demands of emerging markets, call for innovative approaches to financial transactions.
Transfi stands at the forefront of this evolution, offering a suite of products designed to streamline and enhance the payment process for creators, gig workers, and businesses alike. With Transfi's Ramp, you can seamlessly convert fiat to stablecoins, ensuring rapid and secure access to funds. Our Payouts service guarantees swift, reliable, and low-cost disbursements to your global team, eliminating the delays and high fees associated with traditional banking systems. And with Collections, managing and organizing incoming payments becomes a breeze, providing a cohesive and efficient financial management experience.
By leveraging Transfi’s cutting-edge solutions, you can navigate the complexities of the global economy with ease, ensuring that your financial operations are as dynamic and forward-thinking as your business. Embrace the future of payments with Transfi, and empower your growth in the ever-evolving digital landscape.
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