It’s a paradox to say the least.
Consumer demand for instant payments is higher than ever.
Drew Edwards, CEO of Ingo Money, told PYMNTS’s Karen Webster that on the face of it, the use cases where consumers need the money right now appear to be the most popular for instant payouts—think FEMA funds, for example.
As Edwards pointed out to Webster, a key use case that could drive greater adoption of digital payouts may lie in gaming and online sports betting.
Across the board, there is a desire to make payouts digitally and in real time. Nearly half of US consumers who receive payouts would choose to receive them through direct payment rails if they could.
But here’s the paradox: Senders are starting to take away the instant option, at least in some cases.
As measured by PYMNTS and Ingo, 22% of consumers received at least one non-government payment between July 2021 and July 2022. A whopping 17% of payouts were made through direct payment rails.
While the above examples provide evidence of progress, Edwards noted that the lack of faster progress comes down to one keyword: availability.
“I would blame that lack of availability on legacy processes at large enterprises built around controls and ACH, as well as on system and technical resources,” said Edwards. But there’s also the uphill battle of fighting payment methods that have been entrenched for decades. Writing checks is universally acceptable, and ACH payments are generally recurring transactions, with credentials already on file.
“Providing choice, and direct options within that choice, is a different kind of payer-payee interaction,” Edwards said. Peer-to-peer (P2P) managed to solve it through apps, but there are layers of complexity when companies are added to the mix.
And yet it’s hard to fathom how instant payments can reach critical mass if they’re curtailed a bit.
Dig a little deeper into the numbers and it turns out that consumers were 3.5% less likely to choose how they receive payouts in 2022 than they were in 2021. Consumers were only allowed 68% of the benefits they received this year. That means options are removed – not added.
“If you’re one of these companies that decided to build and sew these rails together yourself, you might realize it’s expensive to maintain and pull back on some options,” he said.
Indeed, the cost is the factor that drives at least some players to reduce the payment option. By doing this, and in determining the choice of deposits, Edwards said that ubiquity is also reduced (which ultimately hurts, well, everyone).
Right now, only the check can claim ubiquity in B2C and B2B transactions — as Edwards noted, just about anyone can send or receive a check. But for the company that spends $5 to prepare, print, and mail the $1.58 check — well, the PayPal model becomes cost-effective. Consumer experience with P2P opens the door to a comfort level with instant payouts, and eventually those faster offers will become mandatory.
Some grow bags
A measured pace may be the industry trend, but as Edwards noted, there are a number of providers and platforms (like Ingo) that are seeing merchants actively trying to add payment choices.
Other industries making the move to digital payments — and by extension, eventually instant payments, if they aren’t already there — include the justice system, which has historically become entangled in paper checks. Healthcare is ripe for digitization and direct payments, just like insurance.
“But insurance in particular has a lot to offer,” Edwards says, “because I don’t know of a major insurance company that has fully digitized all their payouts. They go use case by use case to build bridges between legacy technology and modern payouts.”
For the insurance companies that can offer at least some instant payout, consumers choose that option 75% of the time. At a high level, in the movement towards instant payments, progress is being made – just not as quickly as some might like, and of course not everywhere at once.
Commenting on the payouts themselves—and where instant is gaining traction—Edwards noted that consumers have traditionally tended to opt for cash payouts in higher percentages from gambling operators, due to the relative anonymity of those payouts. But, as Edwards said, Ingo is finding demand within the gaming space, where push-to-debit is primarily of interest from consumers.
“It’s an expectation,” he said of instant payouts, “that we see a lot of people slipping away from… [gaming] provider to provider to provider, where there are a number of incentives and games.” The speed of the money paid out becomes part of the allure.
While the statistics show relatively low penetration of direct payments, Edwards said there is reason for optimism.
“When you really step back and realize that this all just started a few years ago — four or five years — and the awareness and adoption that we’re seeing — it’s actually phenomenal,” said Edwards, adding that ” there is a pretty rapid cycle of adoption and transformation going on.”
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