Disbursements Tracker: Instant Payments Increasingly Popular

Almost one out of every five disbursements (17%) U.S. consumers received in 2021 — among the 11 billion total — were instant payments, almost three times as many as in 2020, according to the January/February 2022 Disbursements Tracker®.

That upswing has instant payments gaining ground on same-day account transfers, with 22% of consumers receiving disbursements by same-day automated clearing house (ACH) compared to 20% who received at least one instant disbursement payment, PYMNTS research shows.

Consumers today are 50% more likely to be aware of instant payments than they were in 2020, the latest Tracker shows, and they are 15% more likely to choose instant payments if they’re given the option to do so than they were a year ago.

The January/February Disbursements Tracker® examines some of the misconceptions that consumers and businesses have about instant payments and what they entail. It also explores how offering truly instant payments and adequately explaining their benefits to both parties can help financial institutions (FIs) and other organizations drive instant payments adoption to new heights.

“Businesses see the benefits of instant payments as well, and more than 75% want financial institutions (FIs) to offer faster payment options,” according to the Tracker. “Instant payments can improve cash flow management, make payment operations more efficient and contribute to more secure and accessible payments.

“Businesses can leverage instant payments to achieve better automated invoicing and remittance processing, resulting in fewer errors and exceptions. The combined benefits of instant payments can grow revenue while reducing overhead,” our research shows.

Instant payments have also been shown to drive loyalty, according to the latest Tracker, with two-thirds (66%) of consumers saying they would do more business with companies that offer free instant payment options.

The biggest obstacle/opportunity when it comes to instant payments is educating consumers on exactly how they work and why they’re worth considering. Most consumers don’t know instant payments live up to their name by providing instantly available funds, while 40% of small businesses said they would not switch to instant payments because they are relatively satisfied with their current providers.

Instant payments made through Zelle can show up in a user’s bank account immediately, and 50% of consumers recognize that functionality, our research shows, but 44% of consumers think that other apps such as Venmo, Cash App and PayPal have the same ability, although they do not.

“Consumers have a poor understanding even of ACH transactions, which have existed for decades, and many expect such payments to take up to five days to process, despite the potential for same-day ACH,” the Tracker says.

“FIs may lose ground to nonbank alternatives because consumers do not know how money moves,” according to the Tracker. “Those consumers may not see the value in instant payments, choosing instead to use platforms they perceive as most prominent or readily available.”

“When consumers incorrectly believe a payment platform offers instant payments, their experience with it may cause them to think instant payments are not actually instant — 60% of consumers already believe instant payments take hours or days to process,” per the report.

Money mobility will be the “big thing” for consumers when it comes to instant payments in 2022, according to Drew Edwards, CEO of Ingo Money. He compared the experience of transferring funds between accounts—whether it’s through peer-to-peer (P2P) payment providers, FinTechs, traditional financial institutions or neobanks—to removing cash from an ATM and traveling to another bank to deposit the cash.

Those accounts can be stored within the same mobile phone, for example, but it’s still not always as easy as customers expect to move funds between them. The future of instant payments hinges on providers finding ways to deposit funds into a user’s chosen account without extra steps, Edwards said.