There might be one word that consumers would use to describe the state of disbursements in early 2019: mediocre.
Millennial consumers probably wouldn’t be so generous.
The proof point is the latest Disbursements Satisfaction Index score, which puts disbursements at 56.5 on a scale of 100. It’s not exactly horrible, but not a ringing endorsement of the efficiency of the process.
That’s perhaps not surprising, Karen Webster remarked in a recent conversation with Ingo Money CEO Drew Edwards, when considering that 48 percent of disbursements to consumers still happen by paper check, with an average disbursement amount of $1,084.
The “glass half full” look at that score, Edwards observed, is that there’s a lot of room for improvement in a world where consumer expectations for access can be summed up in two words: on demand.
“What’s driving all of our corporate demand and financial institution demand for instant payments is improving the user experience to meet consumer expectations,” Edwards explained, adding that the FinTechs in Silicon Valley have created the expectation that all of the consumer’s inbound and outbound payments are easy, safe and frictionless.
That naturally led, he said, to consumers asking the logical question: “Why can’t I choose how I am paid and when?”
There are many reasons that money doesn’t just zip around at light speed from point to point, Edwards noted. It’s much harder than most customers realize to move money easily, safely and instantly. And where there’s money – and money that moves fast – there are fraudsters tracking every move that money makes in real time. This is a reality that even the P2P platforms – which ignited the need for speed in disbursements – encountered when they moved to instant payouts.
But those reasons don’t matter to consumers, he said, which means they won’t get businesses off the hook when it comes to leveling up their disbursements game. Consumers don’t care why it’s hard to give them what they want, they just want what they want – and, as Edwards noted, “there’s no going backwards at this point.”
Finding the Right Channels to Reach Consumers
What consumers don’t want is the paper check. But data shows that what consumers increasingly do want is money pushed to them via the alias known as the debit card. Roughly 84 percent of consumers surveyed prefer the debit card to a mobile phone number or email alias.
Part of that, Edwards explained, is the lack of friction associated with pulling out a debit card and snapping a picture of it to get paid, versus the alternatives of scrounging around for a bank’s ABA routing number or remembering passwords that have been long since stored in the cloud.
But part of it is the level of trust that consumers have in the product. To get consumers to use the “check card” – which is today the debit card – banks and card networks “spent a ton of money” to create trust that now translates over to disbursements.
“My 16-year-old tells me that if someone steals my [debit] card, I’m not liable; my bank is,” Edwards joked.
That trusted foundation, built over decades, now translates into consumers’ preference when it comes to pushing payments their way. And debit cards, because they are trusted, now carry the advantage of habit: When looking for an identifying credential, Edwards noted, a debit card is “often the easiest thing to pull out of my pocket and use.”
For that reason, Edwards believes cards will likely remain in the pole position for a long time, but that the market for disbursements needs to think beyond cards, to what’s in consumers’ virtual wallets, such as PayPal, Apple Pay and Zelle.
The Future of Filling a Need
Ingo’s first (often misunderstood) business, Edwards said, was cashing checks.
“Cash is the original instant payment,” he said. As they began expanding their business, partnering with banks and building digital rails to push payments with Visa, they often dealt with skepticism.
But in reality, he said, it is the same thing they’ve always been doing: speeding up the process for those who need funds now, not in the amount of time it takes for a check to be drawn up, deposited and cleared by a bank.
“If I am an insurance company that owes an Uber driver money [for a claim] and it takes me a week to get money to them instead of a second to get it to them, that is a week that driver is likely to have to rent a car to get back to driving and making money to support his family,” Edwards said.
And while people may think these kinds of problems with sudden expenses and living paycheck-to-paycheck only apply to gig workers or low-income earners, the data says otherwise. The Disbursements Satisfaction Index study reports that nearly two thirds (63 percent) of people at all income levels report living paycheck to paycheck – including 38 percent of those earning north of $130,000 a year.
“Instant matters to 63 percent of America because they don’t have spare money in their wallet,” Edwards pointed out.
The good news, for those consumers and for the waves of people who report a mediocre disbursements experience, according to Edwards, is that the “ship has already sailed” in terms of disbursements moving from some time in the future to right now. The question isn’t whether this is going to happen, he told Webster: It’s about how long it will take to build the bridges from the smokestack economy into the digital economy to make instant, seamless disbursements a reality. Getting the institutional contingents producing $30 trillion a year in checks and ACH payments to move to instant is the big lift, but it’s where Edwards says he and his team are seeing “the basic blocking and tackling accelerate” a lot more.
Even more encouraging, he said, is the energy around devising solutions to disbursements that leapfrog the simple automation of the payments process.
“The best part of all is that we’re beginning to see use cases we’ve never even thought of,” he said.