Why agencies and brands should reconsider using Paypal for paying influencers and creators

By
Lauren Russo
March 31, 2022
Interviewer:
Interviewee:
By
Lauren Russo
March 31, 2022
Interviewee:
Interviewer:
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Why agencies and brands should reconsider using Paypal for paying influencers and creators

Whether you are new to influencer marketing or have been building an influencer marketing program for your brand for a while, you will quickly find that there isn’t exactly a “standard” processor payment platform designed for paying influencers at scale. 

Below we will highlight the differences between paying a creator via PayPal and Lumanu that may make you want to reconsider your current process if you are a brand using PayPal to pay influencers for their work. 

PayPal

If a brand has chosen to pay creators via PayPal, it is most likely for the following reasons:

  • Paypal is widely known
  • Paypal works for paying international creators with global bank accounts
  • PayPal can make it easier for marketing teams to dispense funds without having to go through tedious funding or approval processes with their AP team.
  • PayPal is an easier alternative than forcing individual creators to endure internal vendor onboarding processes that your company may require that oftentimes cause a lot of confusion and friction. 
  • Payment methods include credit card, ACH, and payments from the PayPal wallet making it a flexible choice for paying creators if you are a smaller brand. 

However, Paypal was not built for paying influencers and is just a workaround for the above.  In fact, many of the brands who are using PayPal to pay influencers today are most likely using it outside of PayPal’s terms of service in an attempt to avoid merchant fees. Those who use PayPal also need to make sure to use the correct type of sub-platform for businesses, not the individual/personal app, or else there may be payments held for an audit for use. 

This is commonly known as paying “the friends and family method” which essentially means that a good or service is not being exchanged.  In the case of working with a creator or influencer, the content or post they are providing for your brand is considered to be the “good / service” exchanged and the creator is seen as a “seller” or “merchant” in the eyes of Paypal’s terms of service.  This would mean they would be subject to pay an uncapped 2.9% fee to accept payment from you.  

There is no fee to accept cash via the friends and family method, however, it is against PayPal’s terms of service and may result in complications and investigations that could freeze the payment or return it back to your account.  To be safe, never send an influencer payment via the friends and family method on Paypal. It’s not worth the risk, bad for building relationships, and it is not fair of you as a brand to put an individual’s livelihood at risk just to avoid the fees.  

The same concern also applies to the less popular but still sometimes used personal apps like Venmo or cash app.

Additionally, PayPal is not invested in helping creators and offers little support or troubleshooting assistance which may cause the creators to turn to your team for help.  

Why Lumanu is the best app for brands and influencers

Lumanu built a payments solution that solves the most common challenges faced by brands that pay creators such as high transaction fees, vendor onboarding processes, tax paperwork, funding approval processes, creator confusion, and overall friction that occurs during the process of getting a creator paid for their work.  

In addition to tackling and solving the common challenges brands face, Lumanu also is invested in helping creators be more professional when collaborating with brands so they can deliver higher quality work for your team. 

Working with and paying creators has never been easier with Lumanu's payment solution that seamlessly ties into your existing accounts payable process and is specifically built for paying influencers at scale and strengthening relationships. 

With Lumanu you can: 

  • Spare yourself the hassle of handholding each individual creator through any required vendor onboarding processes. Simply send the creator an onboarding link and we handle the rest! 
  • Skip the hassle of collecting tax paperwork and storing personal banking information. Lumanu takes care of all tax documentation and reports on your behalf. 
  • Save time with the ability to pay multiple creators at once with just a few clicks. Pay creators via bulk push payments from an imported spreadsheet or select and pay multiple creator invoices in seconds from your Lumanu dashboard. 
  • Improve your internal processes by speeding up funding approvals and exporting easy transaction records for your accounting team.  Easily fund your account via credit card, ACH, or wire transfer and get access to funds the same day. 
  • Strengthen your relationships with creators by giving them access to Lumau EarlyPay.  Creators can get paid early for approved work without any disruption to your workflow or timelines.  
  • Save time handholding with creators.  Lumanu’s dedicated creator success team is available to assist with onboarding and troubleshooting. 

By using Lumanu, brands and influencers can have a truly collaborative relationship. Spare yourself the hassle of vendor onboarding, tax paperwork collection, dealing with 1099s, and tedious single-payment restrictions. All this and so much more for only $39.

Sign up here or chat with us for a demo!