Can You Deliver on Instant Payouts?

Across multiple industries, workers and consumers are increasingly looking for right-now funding. Businesses that want to thrive will have to meet that expectation.

In a world where instant gratification is king, Freddie Mercury’s famous lyrics have never rung truer: “I want it all, I want it all, I want it all and I want it now.”

That’s the challenge facing many businesses today. As demand rises for real-time payments, consumers—and even business owners—want their money. And they want it now.

Consumer appetites have been whetted by the ease of peer-to-peer transactions, which allow people, seamlessly and easily, to pay for bills, pitch in for a collective gift, or pay back a loan from a friend. The prevalence of faster payouts is forcing brands to provide payees the ability to choose how they will be paid, when they’ll be paid, and to get the money digitally transferred in a moment’s notice. Indeed, frictionless payouts are quickly becoming more of an expectation than a luxury.

As paper checks decline in importance (total dollar value down by 25% in four years), the number of ways businesses can disburse funds to workers and consumers is growing, and so are the benefits. For example, businesses that leverage digital disbursements over traditional paper checks see a 25% decrease in call-center volume, increased customer satisfaction and loyalty, and a 60% reduction in their overall cost of payouts.

Yet, changing payments processes is not easy. Businesses are striving to create frictionless disbursements for their customers and employees that reach their preferred destinations, and at the same time they must make sure those payouts are fully funded and secure. However, the process associated with sending funds from point A to point B can introduce complexity and inefficiency in the payout stream that almost always nets out to one thing: an unhappy payee.

Today’s consumers expect to receive funds rain or shine, with credit available immediately. And they want the transaction to occur just as smoothly on Christmas Day as on a Tuesday in July. Meeting these expectations hinges on a business’s commitment to digitalization and the required investment.

Without a sound digital-transformation strategy in place that evolves platforms and processes to increase loyalty and credibility with the customer, businesses will soon find themselves losing those customers to the competition.

Challenges

Inaction is not an option in today’s environment where secure, instant payments are becoming a must. Here’s a rundown on the trends and contours of this challenging new environment:

– The Rise of the Independent Worker. The freelance workforce is growing three times faster than the overall U.S. workforce. Without a regular weekly paycheck, freelancers and independent contractors are demanding shorter payment timelines, which require a more flexible disbursement strategy. Businesses that adjust to support faster and broader payout options improve their standing in the marketplace.

– Accelerated Insurance Claim Payments. When things go awry, people naturally turn, and turn quickly, to their insurance companies for financial help. Even once a claim is approved, a payout can take weeks or even months, a severe disadvantage for those of limited means or who have just suffered a devastating loss. Insurance companies are already rolling out helpful mobile applications that are transforming the customer-engagement process. Now, by accelerating their digital transformation on the back-end, insurers can make the instant claim payment a reality.

– A Substitute for Cash Tips. As physical cards and digital wallets become customers’ preferred payment options, more restaurants are keeping less cash on hand. But when it’s time to divvy up tips among their employees, restaurants with limited or no cash are challenged to provide it. A digital platform needs to be a plan B so restaurants can quickly access and draw from accounts to pay out tips to these hard-working employees at the end of each shift.

– Instant Jackpot Winnings. Lucky instant-lottery winners are subject to cumbersome payout processes inside the stores where they purchased the ticket. The same can be said for casino winners bringing in lump sums of cash. Business types offering lottery purchases can pay out winners directly to their debit account through readily available digital-commerce technology. And they can do it securely employing tokenized payment data.

– Seamless Medical-Trial Payouts. For selected patients participating in medical trials, generous stipends are paid by check, often weeks after the fact. Medical firms conducting these tests can save up to 60% of their payment costs by using digital disbursements instead of paper checks.

– If You Don’t Use It, Sell It. The rise in renewable energy resources is allowing consumers to sell back unused energy to the utility companies and the grid. Utility companies have traditionally offered payment options in the form of paper checks or ACH direct deposit. But as more consumers look to earn money on their unused energy, utility companies will benefit from simplifying the payout process through digital means.

Many of these scenarios are gaining adoption, but some industries are ahead of others. Legacy processes still permeate many business sectors.

On their instantaneous-payments journey, businesses need to be focused on providing any and all options that suit their customers’ needs. Some older customers may prefer payments through more traditional channels, while others choose to receive funds via their mobile wallets and other digital services.

Catering to all demographics, even those that never possessed a checking or savings account—a group that numbers more than 8.4 million U.S. households—is a must.

Offering All Options

Wherever the customer goes, faster payment options need to be there. And with more customers operating akin to a small business, several other instantaneous payment options could be here sooner than we think, such as:

– Short-Term Lending. Small-business owners need quick access to capital to fund parts of the business, and time is a precious commodity. Instant digital availability of those funds from a short-term loan will prove invaluable to the business owner and increase loyalty with the lender.

– Settlements. Settlement day truthfully doesn’t bring finality to the process, as all parties need to wait several more days to see funds in their respective accounts. As with the story of short-term lending, small businesses need instant access to capital. Research now shows this as a preferred choice, even if it means paying a fee.

– Rebates And Gift Card Funds. Purchasing new tools and equipment can come with big price tags. Small-business owners will be compelled to buy more from the same retailer who can provide instant access to rebate and gift card funds after that first purchase.

Payment innovations available today and those arriving tomorrow are plentiful and providing ample opportunities for companies to foster deeper customer relationships. Delighting the customer always needs to be the first objective #1. And each customer is delighted in different ways.

It is up to companies to provide the payment and disbursement options that deliver on each customer’s expectations. But those options need to be reliable, securable, and scalable to keep customers coming back for repeat business. Are you ready to deliver?

—Robert Clayton is vice president for Advanced Payment Solutions, Fiserv Inc., Brookfield, Wis.