When it comes to accessing their money, today’s consumer wants it now, with the push of a button. As they grow bolder with this demand, consumer requirements for speed, simplicity and choice in how they get paid could soon make push payments technology a corporate standard.
Several players in the payments space have recognized this urgent need for choice and speed and are stepping up to help companies offer this capability. New solutions like Ingo Money’s Instant Payments platform and NACHA’s Same Day ACH initiative are offering corporations digital alternatives to paper checks for funds disbursement.
Push payments in particular deliver instant, safe-to-spend funds directly into a consumer’s account. They can be used as an instant, irreversible digital payment for any transaction that traditionally involves cash, paper checks or an ACH transaction. The market for push payments is enormous, with 22 billion checks written each year alone, valued at $22 trillion according to a Federal Reserve study.
But the very fact that 22 billion checks are written every year shows that companies are still comfortable issuing paper checks. Why? History. The process and infrastructure runs deep and is familiar to everyone. So how and why will companies embrace push payments and finally put slower payment options, like the paper check, out to pasture?
To discuss how recent developments in disbursements could prompt disbursers to embrace newer payment tools, PYMNTS’ Karen Webster spoke with Cecilia Frew, SVP and head of push payments for North America at Visa, about how the company is seeing digital disbursements and push payments change the way consumers gain access to their money.
New Tools on the Block
Since a push payment is effectively a debit transaction in reverse and uses the same rails, Frew sees a much smaller adoption curve than some might think. The process is very familiar to consumers and uses the same cards and accounts they already know and trust.
For example, Frew referred to Uber’s introduction of Instant Pay, a service allowing drivers to get paid quickly for rides through their debit cards. Because the drivers have an existing relationship with Uber, there’s trust there. They are comfortable sharing their information to receive funds.
“If I’m an Uber driver, I will have no problem giving [Uber] my debit card,” Frew said.
But, in a case where the recipient has very little contact with the sender and payments are disbursed on an irregular basis, the situation is different, Frew noted. For example, she said, most consumers have limited contact with their insurance companies, so these companies still tend to send checks through the mail.
“I always like to talk about why checks persist,” she said. “They persist because my insurance company has my home address and probably my home phone number [on file]. They probably don’t have my mobile phone or email.”
One possible solution for these insurance providers would be to develop an alias directory with a mobile phone number or email address attached to a consumer’s debit card which would enable the use of push payments. An alias directory containing current customer information could serve as an efficient way for insurance providers to make sure claimants get access to their money, faster. Once the insurer sends a text or email to their customer informing them that their payment is ready, the customer can simply choose the method by which they want to receive the funds, which quickly arrive in their preferred account.
Frew sees that “push payments in a box” approach enabling similar opportunities for recipients to get paid for all types of use cases, including payroll, expense reimbursement, government payments and more.
Time to Write Off the Paper Check?
Frew said the availability of new disbursement tools like push-to-debit card payments could add fuel to the “kill the check” fire, even though some of these tools can make paper checks more manageable (by allowing them to be deposited using a smartphone camera, for instance).
Another reason to #KillTheCheck? Frew believes that companies will embrace push payments over checks because in addition to customer demand, there is incredible potential for cost savings. She noted that at rates that range from $2 to $10 per check, it can be costly for disbursers to issue checks. In addition to issuance costs, paper checks also have costs to mail, track order and consume time to write. Push payments technology instantly provides cost savings and efficiencies.
Plus, consumers would benefit from getting faster access to their funds and more timely communication from their providers, such as an insurance company. If an insurance provider only has the customer’s home address on file it could otherwise take at least days and even weeks for their claims check to arrive by snail mail.
And that’s not a good customer experience, Frew said.
What’s more, push payment tools could positively transform the dynamic between disburser and consumer, beyond just offering faster access to money, Frew noted.
“The cost-savings for the disburser and the engagement opportunity with the customer will change,” said Frew. The benefits, she said, include fewer check issuance costs and higher customer retention, due to improved communication and money that arrives quickly and is ready to spend.
“It’s a strong enough value that the businesses writing these checks will want to change,” she said.
A Positive Change for Recipients
As push payments become more widely available, Frew believes the services will present a range of benefits for different types of recipients.
For example, consumers can have funds sent anywhere they choose. If the user has a bill to pay, the immediate availability of guaranteed funds can help them avoid a late fee. In the case of small businesses, a merchant can get access to capital so they can pay their workers without having to get a loan.
“It could profoundly change the receiver of the funds and how their finances work,” she said.
At the end of the day, the goal of push payments and disbursement tools is to grant consumers faster access to their money, enabling them to move on with their financial lives. And as a side benefit, slower and clunkier payment methods like the paper check could fall by the wayside.
Looking ahead, Frew sees the potential for push payments to be implemented in various uses cases, from P2P payments to compensation for gig work, like contractors or freelances, to tax reimbursements.
“Name a payment scenario and you’ll be able to receive your funds 24/7 anywhere in the world with just the push of a button,” she said.
In other words, it might be time to order a gold watch for the paper check’s retirement party.
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About the Tracker
The PYMNTS Disbursements Tracker™, powered by Ingo Money, is your go-to resource for staying up-to-date on a month-by-month basis on the trends and changes in the digital disbursement space.