What is payout, and which businesses need it?

The business world is full of jargon and terminology that may be confusing because it’s used in multiple different ways by different people and businesses. One such concept is the term “payout”, which has varying meanings depending on the nature of the business using it.

In this post, we unpack the “What is payout?” question and help you find the right payment solution for your business needs. Let’s explore this in more detail below.

What is а payout, and how does it work?

From the outset, it’s important to clarify that the term “payout” has different definitions depending on the nature of the business using it.

It can be applied to companies with shareholders and businesses that sell products or services to pay freelancers. Insurance companies, lotteries, and those involved in gaming activities also use it.

Here’s a brief explanation of “payout” in each of these different contexts:

• For shareholders: Companies that have shareholders and make a profit will pay a sum of money to these shareholders based on the profit earned over time. In this context, payout refers to making a monetary payment to shareholders based on their initial investment and ownership of shares in the business.
• For businesses making sales: Payouts can also be used when businesses selling products and services receive payments from their customers. It applies to both cases when a merchant accepts in-person payments and online payments.
• In the gig economy or as part of payroll: In that case, payouts are payments made to a business’ third-party suppliers, such as freelancers. They can also mean paying one’s employees as part of monthly payroll.
• In insurance: The insurance world also uses the term “payout” and offers payouts based on various annuities paid to their clients at different time intervals, such as monthly, quarterly, or something else. These payments are made when specific criteria set by the insurance company have been met.
• In gaming and lotteries: Organisations involved in gaming and lotteries also use the term payout. In these cases, payouts refer to monetary payments made to people who have won a prize with a financial value attached.

With each of these different business types using the term “payout”, it becomes clear that although there is no clear-cut definition, it does indicate payments made by one business party to another with a monetary value.

How do different businesses use payout solutions?

Different businesses use payout solutions in various ways. For publicly traded businesses or those that have issued shares, payouts are paid to shareholders when the business earns a profit. These payouts are paid at different periods and reflect the investor’s shareholding percentage in the company.

In the context of insurance companies, payout solutions are used to transfer funds to clients for reasons such as annuity payments or other insurance-related purposes. Furthermore, payout solutions can be used to pay a business’ employees or freelancers.

However, and perhaps most importantly, payouts as the funds a merchant receives for making a sale by their customers are transferred into a special merchant account. This account contains the merchant’s money earned as a result of completed sales.

Payouts that go into the merchant account can be a part of in-person cashless payments. They also can be as part of online payments accepted through the merchant’s ecommerce or online store, which offers a payment gateway.

Why is a payout solution crucial for your business?

Because reliance on cashless payments is increasingly becoming the norm, merchants need to offer payment solutions in addition to accepting cash. In-person cashless payments are often made via a point-of-sale (POS) terminal or card machine. On the other hand, online payments are made through a secure payment gateway that is linked to a payment processor and a merchant account.

Which types of businesses really need payout solutions?

While it’s natural to assume that payouts are only used for businesses that have issued shares to investors who own shares, payout solutions are also crucial for other companies.

They can be the following types of:

• Insurance companies;
• Merchants who earn money from sales;
• Lotteries and gaming companies;
• Businesses that work with gig workers, such as freelancers.

Although there may be more, these examples clearly show the diversity within the payout sector.

What do merchants expect from a good payout solution?

When it comes to choosing the right payout solution, there are important factors merchants should consider for their business. It’s essential to select the right solution for your unique business needs to offer a streamlined payment experience for your customers.

The following criteria typically characterise a good payout solution:

• Security: Whether in-person or online, payment acceptance must have a stamp of assurance that guarantees the security of each transaction that a merchant accepts.
• Payment diversity: Payment diversity refers to cases where merchants can offer their customers multiple payment methods. It can include cashless payment options, such as debit or credit card payments, as well as digital wallets, such as Apple Pay or Google Pay.
• Support: Many merchants also require an exceptional level of support that their payment services provider should offer 24/7.
• Instant settlement: Many payout service providers hold the promise of paying the proceeds of sales into the merchant account on the following business day after the transaction. However, some providers, such as myPOS, offer instant settlement of funds, making for real-time accessibility to payouts.
• Free merchant account and a free merchant business card: In addition to the instant settlement, myPOS merchants can enjoy the benefits of a free merchant account attached to their free merchant business card to access their funds, make payments and purchases, transact online, and much more.
• Reporting and analytics: Merchants also expect their payout service provider to offer them insights into their business performance by providing quick and convenient access to reporting and analytics to drive more informed decision-making.

These are just some of the criteria that merchants look for in a great payout solution. It is worth considering partnering with the right provider that offers each of these elements and more.

Top 3 reasons why you need a payout solution

If you are the owner of a small or medium-sized business, choosing the right payout solution for your needs will be critical. Below are the top three reasons why a payout solution is a must for the continued success of your business.

1. Accept cashless payments online and in person

Whether you run a brick-and-mortar shop, a service-based business, or an online shop, a payout solution that pays you as soon as your customer has paid you means you can better manage your cash flow and business operations.

2. Cater to different payment methods

You may also wish to consider a payout solution to enable you to cater to different payment methods, such as debit and credit card payments or payments made through digital wallets.

3. Accept payments in multiple currencies, cater to a global clientele

Especially suitable for business owners who sell online, you can now cater to a global clientele and accept payments in various currencies, which you will receive in your merchant account in your local currency or GBP in the United Kingdom.

Conclusion

Payout is closely linked to a business’s cash flow. But managing cash flows can be a challenge. Keeping track of all payments coming in as a merchant takes time and effort. However, the process can be managed well with the right payout solution.

In particular, you should consider choosing a solution that offers you detailed insights into your business’s financial performance through instantly accessible reporting and analytics tools.

In addition to this, security should also be at the top of your mind, as should the availability of funds instantly settled in your merchant account. Whatever type of business you run, no matter your unique requirements, settling on the myPOS payout solution is the right choice for you under every circumstance.

Frequently Asked Questions

What are dividends?

Dividends are payouts to shareholders in a company, often determined by the company’s board of directors. They have a financial value and can be paid in the form of reinvestment into the company’s stock or as cash.

In what form are payouts paid to investors?

Payouts to investors can be made either as cash payments or as a reinvestment into the company’s stock, thus boosting their shareholding.