Ever see a movie where someone executes a series of complicated, risky moves to enter someplace, only to find that the front door was unlocked and they could’ve easily walked in? It’s a little like that in disbursements right now. The “door” in this case is access to funds instantly. Such disbursements are available and offered, but many firms aren’t aware of it.
That’s a problem for some, an opportunity for others.
This is among the surprising findings in the September Disbursements Satisfaction Report 2020: Monetizing Payout Choice, a PYMNTS and Ingo Money collaboration, based on surveys of more than 5,000 consumers and 500 microbusinesses, as well as 600 companies and large corporate payors. Instant access to one’s money is, not surprisingly, a powerful force.
“Solutions have fortunately emerged in recent years that allow consumers to access their funds within 30 minutes of disbursement — and sometimes within seconds. The funds are transferred directly into any type of account, including bank, prepaid and digital wallet accounts,” the report states. “Consumers and microbusinesses do not regard these ‘instant’ payment options as mere fringe benefits: They are twice as likely to want to continue business relationships with entities that offer them than with those that do not.”
Got that? Firms offering real-time payments (RTP) and instant transfers are “twice as likely” to retain their current customers as those that do not offer instant. Offering instant disbursements also puts companies in a better position to make a run at their competitors’ customers.
The Rules Have Changed
It’s not like financial institutions (FIs), merchants and payors aren’t familiar with faster rails. Until fairly recently, however, few were seeking ways to pay out money faster. Businesses accepted net 45 terms just as employees assented to a two-week pay period as the way of the world. Employees routinely went out-of-pocket for company expenses, then just waited.
Then the world changed, and with it, expectations around money. PYMNTS research has found a significant perceptual gap around instant payments, and this confusion is putting customer loyalty at risk. Simply put, you may offer RTP as a payor, but a striking number of your payees probably don’t know that. If a rival offers them RTP first, say goodbye to that account.
“Payees perceive that they have restricted payout choices,” according to The Disbursements Satisfaction Report 2020. “Just over half of consumers and microbusinesses believe they can choose whether to receive disbursements through a variety of methods, including check, direct deposit or card-based payments. Payors have a different perspective: They say they offer payout choices for almost 80 percent of the disbursements they pay out.”
Closing the “instant” gap is (or should be) a top priority of accounting departments now.
A Matter Of Choice
Another way of viewing the situation is through the lens of consumer/payee choice.
With PYMNTS research showing that 57.2 percent of consumers and 52.7 percent of microbusinesses “believe they can choose whether to receive disbursements through checks, direct deposits, credit card payments or other payout methods,” the frustrating flip-side is that “78.8 percent of payors [state that] they offer such options,” per the new report.
The new study shows that payors clearly need to do a better job of communicating the payments options on offer and start closing up knowledge gaps that can harm loyalty.
“Payors seem to perceive instant payments as a sweetener more than a deal breaker, with 65 percent citing convenience and 57 percent citing accommodating payee preferences as the top two reasons for enabling instant access to funds,” according to Disbursements Satisfaction 2020.
“The possibility that payees could stop doing business with them was the least-cited reason.”
And that, in a nutshell, is the problem. Payors need to understand the urgency and get the word out on the availability of RTP to customers and be that source of instant funds.