Reduce attrition with the right payout methods

What is seller’s attrition?

In the world of platform businesses, seller's attrition refers to the loss of sellers or contributors over time.

Given the abundance of opportunities in the gig economy — from ridesharing to cleaning to knowledge services — understanding seller’s attrition is the first step to retaining reliable and high-performing sellers, which is crucial for a marketplace platform’s sustained growth and success.

Some trends and causes contributing to seller's attrition include:

• Competitive market landscape. With more than 500 online marketplaces and gig economy platforms globally,¹ sellers can easily switch if they're dissatisfied with one platform.
• Inconsistent income. Many sellers experience fluctuations in earnings due to the seasonal or demand-driven nature of gig work, leading to instability.
• Platform policy changes. Sudden changes in terms and conditions, commission structures, or operational policies by the platform can create dissatisfaction among sellers.
• Poor payout experiences. Delayed payouts, limited payout options, and cumbersome payment processes can cause greater attrition.

How to prevent attrition through the right payout method

The efficiency, reliability, and flexibility of your payout system can directly impact a seller's experience. Payout methods that align with their preferences and needs can help them feel valued, whereas slow or cumbersome payment processes may undermine the very purpose of gig work.

Beyond lowering seller’s attrition, other benefits include:

• Increased loyalty. Sellers are likely to stay loyal to a platform that offers convenient and reliable payment solutions.
• Attraction. Word-of-mouth from satisfied sellers can be a powerful tool in attracting additional talent and maintaining a competitive edge.
• Positive reputation. Efficient and flexible payouts contribute to a positive reputation in the marketplace.

What matters to sellers and what marketplaces should consider

The evolving needs and preferences of sellers in online marketplaces are driving significant changes in how payments are processed.

Payee demand and demographic

Gig workers generally skew younger. In 2023 in the U.S., one study found 52% of Gen Z professionals and 44% of Millennial professionals performed freelance work, compared to lower participation among professionals of other generations: Gen X (30%), Boomers (26%), and Silent Generation (38%).³

Although bank transfers remain a common payout method, there's a growing expectation for more modern, digital, and convenient payment methods among these younger sellers. For example, given their ease of use and instant transaction capabilities, digital wallets like Venmo and PayPal may appeal to a wider range of payees. One report, for instance, found about 83% prefer to be paid immediately for their work.²

Similarly, bank cards may offer a faster and more convenient experience than traditional bank transfers, catering to the needs of sellers who prefer immediate access to their funds.

User experience

An intuitive and self-service payout experience is essential for building loyalty among payees. Empowering sellers to manage their payouts independently fosters a sense of control that resonates with the autonomy and flexibility they typically seek when opting for online marketplace and gig economy work.

That said, marketplaces need to consider whether integrating a payout mechanism into their existing platform or adopting a white-labeled, external turnkey environment is more suitable for their needs.

The former offers a seamless experience, keeping sellers within the ecosystem of the platform, which can enhance trust and user experience. On the other hand, an external turnkey solution can provide specialized features and capabilities that may extend beyond the scope of in-house development — all while maintaining a consistent brand experience.

Cost

When dealing with international payments, the variation in fees based on the payout method can be substantial. As of late 2022, the average cost of sending $200 globally was 6.2%.⁴

Providing payees with the option to receive payments in their local currency through local payment methods can be a significant competitive advantage. This reduces costs for the payees and enhances the marketplace's attractiveness on a global scale.

Speed and flexibility

A survey found that approximately 85% of gig workers say they would work more often if they were compensated more quickly.⁵ Sellers value speed so much that many workers in the survey said they would even pay a fee to receive their earnings instantly.⁵

Instant payouts are especially relevant for businesses centered around the fast delivery of products or services, seamlessly integrating with and enhancing their business models.

Geography and globality

Close to 75% of gig economy platforms are regional or local rather than global,¹ making multi-currency payments vital.

Multi-currency payout optionality facilitates global operations and helps payees avoid high currency conversion fees. This consideration can be key to attracting and retaining international sellers, creating a marketplace that’s more inclusive and accessible to a diverse seller base.

Leveraging PayPal’s payout capabilities to minimize attrition

PayPal’s comprehensive payout capabilities, powered by Hyperwallet, offer a seamless experience for marketplaces and sellers alike.

With up to nine unique transfer methods available, PayPal offers flexibility and convenience to sellers, allowing them to choose the right payout method for their individual needs and preferences. This helps online marketplaces and gig economy platforms minimize attrition and sustain growth.

Some PayPal payout capabilities include:

• An intuitive branded payout experience. Compensate your sellers through a user-friendly payout interface that aligns with your marketplace’s brand.
• Easy integration. Easily integrate payment technology with drop-in transfer UI and APIs.
• Diverse payout methods. From direct bank deposits to real-time payments via bank cards and digital wallets (like PayPal or Venmo), you can cater to varied seller preferences.
• Multi-currency support. With support for over 50 currencies, PayPal minimizes the fees charged for currency conversion, making cross-border transactions more economical for sellers.
• Local bank payment support. Send local payments to sellers in over 90 countries, allowing them to avoid paying international transfer fees.

PayPal isn’t just useful for platform businesses – learn more about how it supports the digital payout revolution for airlines.

Empower your sellers with PayPal

Freelancers feel optimistic about the gig economy, with 85% of current freelancers saying the best days for contract work are ahead – and clear optimism about opportunities for career growth, earnings potential, and personal development.³ Amid this landscape, embracing flexible, efficient, and user-friendly payout options will become more important than ever for maintaining a loyal seller base and attracting new talent.

Learn more about how PayPal’s global payout solutions can align and support your business objectives, ensuring a robust and satisfying experience for sellers.