Dynamic Payouts: All The Information You Need to Know

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Dynamic payouts help you create tiered incentives and customizable rates. These will help you reward partners fairly for driving traffic and sales. With flexible and transparent partnerships, it becomes easier to have long-term business relationships with your partners and sub-merchants. 

This article takes you through everything you need to know about dynamic payouts. You’ll learn its benefits, challenges, and best practices. You’ll also see the factors to consider when setting up the system and the future of dynamic payouts.

Let’s get started!

What are dynamic payouts?

Dynamic payouts are solutions that see credit split between partners across the conversion journey. Since customers interact with different partner types throughout the research and buying process, each partner should receive a share of the commission earnings. 

Dynamic payouts are different from traditional payouts in many ways. They allow you to pay everyone fairly for their contributions. You can adjust commission rates on performance rather than arbitrary positions in the marketing funnel. 

Since partnerships thrive on increased transparency, dynamic payouts work best for any business leveraging multiple partnerships. Let’s use software companies as an example. Most SaaS marketing strategies involve several partners like affiliates and influencer marketers. 

The same thing happens in the ecommerce industry, where affiliates, content creators, and other partners are involved. 

Dynamic payouts help you set different goals and assign a commission percentage for each according to priority. You can then communicate this with your partners so that everyone knows about it.

Woman smiling at her phone and holding a mug having received a dynamic payout

Benefits of dynamic payouts

Dynamic payouts facilitate faster payouts. You can pay for products and services delivered to you from other countries using card brands within a day. You also get to decide whether to pay for the products weekly, daily, or monthly. You can also split payments across multiple bank accounts. 

The dynamic payout system uses a complex formula or a tiered billing structure to calculate the fees to charge service providers. All this makes for more accurate, efficient, and balanced payouts.

Also, fees are charged at a transactional level. This is known as transactional pricing. This happens when a customer is charged based on the number of transactions done in a specified time. Ultimately, you get cost-saving benefits from dynamic payouts.

Dynamic payouts can also help you save on costs through their closed-loop transaction feature from payment to payout. This means they reduce your dependency on other vendors to complete payments, therefore saving you fees. 

Additionally, dynamic payouts help you get rid of the historical payout failure rates that have plagued traditional payout systems. In other words, due to their accuracy and efficiency, payments rarely fail. This then minimizes the costs associated with the Payment Card Industry (PCI).

Overall, you achieve a better partner and customer experience when using dynamic payouts. 

Factors to consider when implementing dynamic payouts

When implementing dynamic payouts, the first thing to consider is your agreement with your sub-merchants, customers, or partners. Did you agree for payments to be made weekly, monthly, or daily?

Also, consider which payment platform you will be using. For instance, which card company do your partners and customers prefer? Here’s a diagram showing the flow of funds in a dynamic payout system.

Image describing how dynamic payment works with TechToPay, including Consumers to Merchants to Payment Service Providers to TechToPay (which provides fraud and risk monitoring, compliance, dynamic routing, treasury management, and FX/DCC) to both Acquiring Networks and Bank Settlement Networks to finally Payment Methods (which includes Digital Wallet, PayPal, Vouchers, Alternative Payment Methods, Cash Loading, China Union Pay)

Image via TechToPay

Additionally, consider whether you have any unique partners who would need custom payout structures created for them. These are partners that may be entitled to more income than the rest. 

In that case, ensure you create a special structure for them as you set up your dynamic payouts. Use generative AI to create new instructions for your dynamic payout system. Tools like Ask Writer (shown below) let you create this kind of content with ease. You just need to insert the right prompts, and it will generate the content you need.

Screenshot of Writer content generator

Image via Writer 

You can use GRIN’s commission tiers to reward your top-performing affiliates or partners.

Screenshot of GRIN's affiliate marketing page

Security considerations should be at the top of your priorities list when it comes to dynamic payouts token systems. Ensure your systems cannot be breached by cybercriminals and payments diverted to a different location. 

This ties in with risk management and fraud prevention. Choose a dynamic payouts tool with a track record of top-notch cybersecurity systems.

Data management and integration are also key. Integrating data makes it easier to manage all your partners or customers in one place. As shown below, create a system that will allow you to work with all complimentary applications and software services without much restriction. That way, you won’t have to switch from app to app when conducting payouts.

Illustration of a woman comparing several types of payment options

Image via Corefy

Finally, get to know the laws governing payout systems in your state or country. Regulatory compliance is key to the success of your dynamic payout system.

Use cases for dynamic payouts

Due to their flexible nature, dynamic payouts can cater to various businesses of different kinds and across multiple sectors. 

Ecommerce and marketplace platforms

Dynamic payouts can help ecommerce platforms when it comes to returns and refunds. Refunds usually take 3-5 business days to be released. However, with dynamic payouts, ecommerce stores can initiate and complete the refund process in minutes. 

Online gaming and gambling

Dynamic payouts can help gaming companies process online gaming prizes with ease. Companies like the dynamic payout Bingo game can process these prizes instantly and without any delays. These Bingo game machines would otherwise take several days to process these payouts.

Gig economy and on-demand services

The gig economy and influencer marketing have taken the world by storm. More companies prefer on-demand services rather than employing full-time staff for some positions. Dynamic payouts allow freelancers to track their earnings in real-time and get paid in one business day. This is faster than traditional payouts would allow. 

Insurance and claims processing

Insurance companies can pay their affiliates and advertisers quicker using dynamic payouts. This is done using the values that determine a lead score, such as the customer’s age, gender, and insurance type. 

That makes it easier to determine the affiliate’s commission and pay it out in seconds. In the same way, insurance claims can be processed quickly and sent to the customer within a short time.

Challenges of dynamic payouts

Dynamic payouts are not without pitfalls. 

First, data security and privacy concerns are real issues. Since dynamic payouts require sensitive customer information to work effectively, they pose a challenge to companies to ensure customer data is safeguarded.

Some companies still have outdated legacy payout processes, which makes it difficult for them to integrate modern dynamic payout systems with these old systems. This makes some businesses stick to traditional payouts, even though they are not as beneficial for them. 

The image below shows the benefits of upgrading your legacy systems.

Infographic on why to modernize systems Infographic on why to modernize systems part 2



Image Data via Data Science Central

Why Modernize Systems?

  1. Businesses that had implemented legacy systems modernization can increase annual revenue by 14%.
  2. Modernizing the systems can result in business costs drop by 13%.
  3. Replacing or updating legacy applications could boost the productivity of the developers by 40%.
  4. 44% of CIOs believe that legacy systems are a major barrier in the growth of the company.

Source: “The True Value of Legacy Systems Modernization for Businesses” by Roman Chuprina, Data Science Central

Managing risks and preventing fraud is also a serious challenge for dynamic payouts. Some payouts contain large amounts of money. Any fraudulent attempts on such payments could lead to huge losses to the company and its partners. Therefore, securing transactions is of utmost importance.

Compliance with the financial regulations of the state or country can also be a challenge. Some laws need to be updated to support the functioning of dynamic payouts. 

In addition, some top decision-makers are resistant to change and prefer to remain with their current payout systems. This makes it challenging to implement dynamic payouts in companies.

Best practices for implementing dynamic payouts

You can take several steps to ensure your dynamic payout system is successfully implemented. 

The first is to start with a plan. Prepare thoroughly for your system set-up. Get all the necessary details you need from your merchants and partners, along with their preferred mode of payment. You can use tools for group communication to talk to them. The good thing about these tools is that you can easily check your chat history if you need to look for specific details you already discussed beforehand. Just make sure you create different group chats for each merchant or partner. 

Second, do your research and find out the best tool and system to use for the smooth running of your dynamic payouts. You can also use this research to advise your merchants on the best platform to receive their payments. 

During the research stage, make sure that the platform you choose has sophisticated security features. It should protect both your data and that of your partners. Update the tool regularly to get the latest security features and keep yourself protected at all times.

The final step is to keep evaluating your dynamic payout choices to make sure they are running smoothly as per your needs. Feel free to give new payout rules to your system whenever the need arises.

The future of dynamic payouts

The future is bright for dynamic payouts. Regulations are catching up with the rapid growth of dynamic payouts. 

Innovations in dynamic payout systems are expected to continue. Systems are expected to be more efficient and take less time or effort to set up and manage. 

Additionally, modern computer systems are outnumbering legacy payout processes. This will continue to make integrations easier for dynamic payout systems.

Overall, more companies are expected to embrace dynamic payout systems. This will allow them to accommodate more partners and keep long-term relationships with affiliates, influencers, and sub-merchants.

Conclusion

Dynamic payouts split credit between partners across the conversion journey. This makes sense since customers interact with different partner types throughout the buying process. Therefore, every performing partner should receive a share of the commission earnings.  

This article explored the benefits of dynamic payouts, factors to consider when setting the system up, some use cases, challenges, and best practices when it comes to dynamic affiliate payouts. 

You also saw the future of dynamic payouts and what the landscape will look like in a few years. Now that you’re equipped with the right knowledge, you can now set out to implement that dynamic payout system that works well for your business.

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Written by Nico Prins

Nico is the founder of Crunch Marketing, a SaaS link-building agency. The company works with enterprise SaaS clients, helping them scale lead generation globally across EMEA, APAC, and other regions.

© Grin Technologies Inc. 2024. All rights reserved.

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