Paying the sitter: where social, payments, and taxes collide

In the age of social media, a number of tech solutions have sprung up to address the Babysitting Problem; i.e., the difficulty involved in finding a trusted babysitter and securing his or her services. That tech companies would want to capitalize on childcare shouldn’t come as a shock to anyone: the global daycare market was worth $44 billion in 2011 and is expected to increase to nearly $67 billion by 2017. put together a comprehensive top 10 list of apps and services to make finding, managing, and paying babysitters easier, but the basic premise of most of these apps is that they enable parents to utilize an online community (either through Facebook Connect or a private network) to rate and share babysitters.

The fintech component of these babysitting apps is in mobile payments: most of the apps let parents pay the sitter directly through the platform. The payment processing leader of the industry is Paypal’s Braintree; of the 5 apps on the list that have payment capabilities, 3 are facilitated by Braintree — the other two use direct deposits through the app (a fresh new offering in the UK, Bubble, also uses Braintree for payments).

Banks are just entering the P2P payments scene with clearXchange, but the mobile and online payment battle for the niche industries such as babysitting and car and house sharing has already been won by Paypal. Though Paypal does have other payment competitors like Stripe and Square, the competition is far behind: Datanyze’s payment market data reveals that Paypal controls a whopping 82% of the online and mobile payment industry.

Babysitting apps fuse fintech and social media to create really simple, mobile solutions for sitters themselves as well as for parents.

However, with great fintech comes great taxibility. If the traditional cash payment model lets babysitters avoid taxes with ease, signing up as a sitter on any of these platforms makes it more difficult to avoid Uncle Sam’s tax requirements (or the Queen’s, if you’re using Bubble).

While some babysitting apps just remind sitters to file taxes, other apps are more directly involved. For instance, babysitters who use the Payment Feature on Sitter receive a 1099-K tax form generated by Braintree by January 31st of each year, and online childcare pioneer’s HomePay product bills itself as “Nanny taxes, made easy”.

With fintech and social media increasingly partnering to solve for particular industries, the question of taxes and regulation will loom ever larger. If Airbnb is turning into the Sheriff of Nottingham, the fintech-social media cocktail could turn out to be simplicity making life harder for independents.

Photo credit: Parker Knight via / CC BY