Payouts API vs. Traditional Payment Methods

What is the Advantage of Using a Payouts API vs Traditional Payment Methods?

Businesses in every industry handle countless transactions every month. Regardless of your company's size, your accounts payable needs are likely substantial. Mass payouts can be a nightmare, whether you're sending payouts to local influencers, global freelancers, or thousands of marketplace sellers. It's one of those facets of business that many leaders believe is unavoidable, with few options for improvement.

Traditional payment methods get the job done. However, sending mass payouts through outdated means can be time-intensive, expensive, and confusing, with countless compliance and legal hurdles to navigate. Offering several payment options to sellers, vendors, and suppliers is beneficial. Unfortunately, doing so through traditional payment methods creates challenges that could harm your business.

Fortunately, application programming interfaces (APIs) are here to change things for your business! APIs for mass payments create a new payment infrastructure that may streamline your operations, helping you achieve safer, more effective, and compliant accounts payable processes.

Understanding Traditional Payment Methods

Traditional payment methods refer to the old standard ways we used to send money. These include writing a check, sending cash, initiating a bank transfer, or even making payments through the phone using corporate debit cards. Decades ago, those were the only options for consumers and businesses.

They still serve a great purpose and can work just fine in typical vendor-to-consumer situations. But they're less than ideal when your business needs to send mass payments.

Debit and credit transactions incur high processing fees, and the same applies to ACH payments made from one bank account to another. Checks and cash carry additional postage fees, a higher risk of loss or theft and other costs.

Fees are unavoidable, but inefficient solutions with traditional payment methods can cost your business when sending mass payments. Furthermore, managing hundreds or thousands of fees adds more time and resources.

Today, banking is much more diverse. Consumers have access to mobile applications they can use to accept and receive money. Apps like Apple Pay, Google Pay, and countless digital wallets make handling transactions easier than ever. Yet, businesses often stick with traditional payment methods when sending payouts.

While they're tried and true solutions, they come with many pitfalls.

Security and fraud risks

One of the biggest issues with utilizing traditional payment methods is the higher risk of security problems and fraud. Initiating and sending out mass payments using debit cards and checks leaves more room for safety concerns than most realize.

Checks and cash are physical objects. Therefore, they're susceptible to being misplaced or stolen. Unfortunately, there are many frauds in the world; all it takes is for a thief to steal an envelope out of a mailbox to cause trouble.

Debit and credit card payments offer additional layers of security over cash and checks, but they're not immune to risks. Criminals can steal card numbers, hack into bank accounts, and more. Payment service providers can help mitigate risks, but there are no guarantees. One security breach or incident of credit card theft can sink a small business or startup.

Businesses should take any precautions to protect themselves and their payment recipients. There are many ways to do that, but one of the most impactful methods of ramping up security and minimizing fraud is improving how your company handles payouts.

Slow processing times

Another headache of traditional payment methods is slow processing times. Most methods will take several days to process. Exact timelines can vary, but conventional payment options are anything but quick.

Physical checks and cash must go through the mail carriers. Meanwhile, payments made via cards or bank accounts might require several phases of verification and processing.

Slow processing times can hurt your relationship with vendors, sellers, and other recipients. People want to receive payments as quickly as possible. Nowadays, having to wait several days to a week or more to have money in hand feels archaic.

The wait can disintegrate trust between your company and your payment recipients, leading to headaches in the future.

Limited international reach

We live in an increasingly global world. Thanks to the Internet, working with people outside the United States is easier than it's ever been. Depending on your business, you may have freelance workers to pay in Asia, influencers in South America, or marketplace sellers in countless countries worldwide.

Whatever the case, sending funds outside U.S. borders isn't easy when using traditional payment methods. There are ways to make it happen, such as through global remittance service providers and foreign banking. However, those methods have limited global scalability.

They can be a hassle to incorporate into your accounts payable processes. Furthermore, sending money overseas may expose your business to tighter regulations, presenting more compliance hurdles to overcome.

Introducing Payouts API

The challenges of traditional payment methods exist regardless of industry or business size. However, contrary to popular belief, you don't have to settle for them. A payout API like Dots can transform your entire approach to accounts payable, allowing you to send payments to recipients worldwide without the hassle of outdated payment methods.

A payment API is a unified platform for all your payouts, turning several separate workflows and operations into one. Because its application programming interfaces allow software and applications to communicate securely, they're easy to integrate into your existing ecosystem.

Integrating a payment API can address many of the pitfalls of traditional payments, giving your business greater control over money movement while granting your recipients more options and convenience.

Speed and efficiency of transactions

Ditch the lengthy processing times in favor of faster and more efficient payouts. With a payout API, recipients can spend less time waiting and trying to submit information through payment gateways. APIs handle most of the heavy lifting, and automated features can help your business send payouts like clockwork. That means fewer late payments and unhappy vendors.

Another fantastic thing about a payments API is that you can offer all the versatility your recipients need. APIs can handle same-day ACH to bank accounts, real-time payments (RTP) for near-instant access, and more. With support and easy integration for countless digital wallet services, your recipients can receive funds on their terms without the lengthy wait.

Enhanced security measures

A payments API may also improve security in many ways. By forgoing physical checks and cash, businesses automatically reduce risks. But APIs can go even further to enhance security in other ways, offering peace of mind to businesses and payment recipients.

The Dots payout API employs end-to-end 256-bit encryption, the same technology many financial institutions use worldwide. Tokenization secures personally identifiable information, account numbers, and other information that must be kept under lock and key, allowing businesses to turn sending mass payments into a less risky endeavor.

APIs can also help with legal compliance. Dots provides advanced Office of Foreign Assets Control (OFAC) compliance measures. The API can also automate anti-money laundering (AML), Know Your Customer (KYC), and counter terrorist-funding compliance obligations.

Cost-effectiveness and reduced transaction fees

A payout API may also help reduce transaction fees and costs associated with sending mass payments. Traditional alternatives like checks and cash payouts are often costly due to higher fees from financial institutions and payment processors. You must also factor in postage, printing, materials, and associated labor costs.

Shifting to a payments API frees your business of unnecessary expenses. You can route funds more effectively to benefit your company and manage fees more effectively to minimize costs. Fees still exist and can vary, but APIs make it easier to manage those expenses, making it a more cost-effective choice over traditional payment methods.

Global scalability and broader reach

Don't let limited global reach hold your business back. Benefit from a more expansive reach around the globe and impressive scalability. Send domestic and international payouts with a single API, and give your recipients their money on their terms.

With Dots, you can pay vendors, sellers, freelancers, and more using various payment methods in over 150 currencies. Send an influencer in the United Kingdom funds to their bank account through a direct Bacs payment. Or, establish multiple payout rails to allow recipients in foreign countries to get funds in a way that's most convenient for them.

One API integration will allow your business to send funds through several payout rails, including PayPal, Venmo, Cash App, PayNow, GoPay, and much more. An API like Dots can make it easier to tap into a global talent pool with minimal concern over payment and compliance hurdles.

Factors to Consider

There's no denying that API integration can be a game-changer for businesses. However, there are many factors to consider when choosing the right API.

The first is to consider how you currently handle mass payouts. APIs can benefit numerous types of businesses sending batch payments to recipients nationwide and beyond. Some examples of situations when businesses have the most to gain include:

• Marketplace payments
• Payments to independent contractors or freelancers
• eSports payouts
• Class action settlements
• Royalty payments
• Affiliate program earnings
• Ad network payouts
• Telehealth payments

It's also important to consider the type of versatility you need. Not all APIs are the same. If your priority is to offer multiple payment options for your recipients, you must choose an API that can handle various payment rails.

Finally, consider integration. Your business likely already has a well-established operation. You must consider not just behind-the-scenes integration; changes to the user experience for payment recipients can also cause trouble.

The best APIs are developer-friendly, offering easy integration and setup for a smooth transition to more efficient mass payments.

Make Payouts Easy with the Dots API

With Dots, you can say goodbye to traditional and inconvenient payment methods. The Dots API is an easy and highly efficient solution for businesses sending mass payments throughout the world. Streamline how you move money, utilize a strong network of payment processors, manage fees, and cover your compliance bases.

With Dots, you can offer your payment recipients speed, convenience, and flexibility while optimizing how your business operates. Schedule your Dots demo today to learn more about how our API can improve your approach to mass payments!