Digital Transactions Authoritative, insightful and timely information for payments professionals
MasterCard Inc. and Visa Inc. reported Monday that online-payments specialist Stripe Inc. is using their instant-payment services to pay merchants such as ride-sharing service Lyft and other users of Stripe’s marketplaces.
Stripe actually began offering what it calls Instant Payouts relying on the network services—Mastercard Send and Visa Direct—to merchants as far back as last November, but the San Francisco-based firm and the networks are only disclosing the developments now. A MasterCard spokesperson attributes the delay on MasterCard’s part to the fact that the services were under test. All three companies (Visa happens to be an investor in Stripe) reported the developments in blog posts or press releases.
Both Mastercard Send and Visa Direct use a process called “original credit transactions,” or OCT. With an OCT, a processor such as Stripe acts like a merchant reversing a transaction through the bank card networks, but instead of flowing to the sender, the credit from the reversal goes to the receiver’s account. That process enables a Lyft driver, for example, to be paid almost immediately instead of waiting for periodic payments. All the recipient needs is a debit card.
“This way, [Stripe] marketplaces can give service providers a much better product experience by sending them their earnings faster than ever—and greater flexibility and control over when they get paid,” said Dave Coen, a product and business-development executive at Stripe, in a blog post.
The real-time payments services currently are available to U.S. merchant’s using the Stripe Connect platform. In addition to Lyft, early users include Postmates, an on-demand delivery service; Instacart, a grocery delivery service; iCracked, a repair service for Apple Inc.’s iPhone and iPad devices; Care.com, for caregivers, and goPanche, for paying beauticians and barbers.
Lyft last November became the first merchant to use the speedier service and “has already sent over $500 million to drivers using Instant Payouts,” Coen said. “In fact, Lyft now sends the majority of its driver payouts instantly—the only ride-sharing company to do so.”
Instant Payouts charges 1.5% of the transaction amount, with a minimum of 50 cents, according to Coen.
Independent payments researcher Aaron McPherson says the Stripe service shows the bank card networks will be major players as demand for faster-payment systems grows. In addition, the same-day ACH initiative from automated clearing house network NACHA and the clearXchange (soon to be renamed Zelle) person-to-person payments service from the big-bank-owned Early Warning Services LLC could squeeze tech startups in the payments industry, he says.
“We are starting to see networks converge in a way that gives us a picture of what the near-term landscape will look like: same-day payments over the debit card rails, over ACH, and over specialized P2P services like clearXchange,” McPherson tells Digital Transactions News by email. “I fear some of the early entrants, like Dwolla and PayNet, are going to face much more intense competition this fall, and we may be headed for a shakeout in 2017. In other words, real-time is now.”
A big uncertainty, however, is “how much people will be willing to pay for faster access to funds is unclear,” he adds.
In addition to Stripe, other OCT users include Square Inc. with its Square Cash person-to-person service.
