Instant Payments Have a Batch-Based Systems Problem – Consumers Say Figure it Out

What typically happens when consumers want a particular product or service, have expressed their strong desire for it, see other providers with similar capabilities offering it, but are told they can’t get it from their preferred provider?

Many will take their business to where they can get what they really want.

It’s a sentiment that United States consumers increasingly express when it comes to payouts from businesses that owe them money. Whether the use case might be gaming winnings, insurance claims payments, gig payments, tips, loan proceeds, legal settlements, rebates or incentive payments, 22% of consumers who received at least one disbursement are somewhat less likely to continue a client relationship if the sender doesn’t offer instant payments.

It’s a puzzle that Drew Edwards, CEO of Ingo Money, told Karen Webster comes down to three words: “batch-based systems” that operate in direct conflict with the 24/7/365 digital world in which consumers live. One in which consumers expect access to their money anytime, any day, any way they want to receive it.

“So many businesses — both corporates and banks — still operate on batch-based systems, despite the launch of RTP^®,” Edwards said. “Banks close over the weekend and are closed after what was once considered normal business hours, which is not how the digital economy operates.”

The shift to instant, 24/7 and real time will take time, he said. And just like many other things in the payments world, banks and corporates will build “bridges” to make “instant” happen in their batch-based world. Over time, Edwards explained, banks will partner with someone like Ingo or build other bridges to make 24/7, instant payments possible.

The alternative is they’ll risk losing customers to a competitor whose bridge to instant is modern and in place.

“If [instant] is available at this insurance company and not that insurance company, and [the consumer] had a slow claims experience, then that customer is lost,” Edwards explained, adding, “That’s when it really hits the tipping point — when it becomes demanded.”

Let the Bridge Building Begin

The pressure to build those bridges is only increasing.

PYMNTS research of nearly 2,300 U.S. consumers in the “Disbursements Satisfaction Report 2023,” found that given the choice, 68% always picked instant as a payout option when offered, yet only 22% of consumers reported receiving a payout that way in the past year.

Gaming and hospitality are probably the hottest sectors right now and where Edwards said he sees the greatest push.

Instant got its initial tailwind from gig platforms. Like gig workers who want instant payout for the work performed that day, instant payout of tips and winnings replaces the “instant” of cash payouts with the security and convenience of instant digital payouts.

“The most momentum we are seeing coming out of 2022 and going into 2023 is in the hospitality industry,” he said. “That is a very broad industry. You’re talking about hotels, talking about casinos, you’re talking about restaurants, not only full-service restaurants but QSRs. Here we’re not killing the check, we’re killing cash, and that’s just on fire.”

Edwards said he also sees demand from the super-regional banks, which are now being pressured by their corporate customers to deliver choice and speed to their end customers. He said that corporates asking for real-time payments has suddenly become part of conversations where it wasn’t before. Even as recently as last year, few corporates even asked Ingo whether they could get RTP^®, but that’s changing.

“Whether it’s a consumer or a small business or an end user — once the receiver of money says, ‘What do you mean I’ve got to wait?’ That wakes everybody up,” he said. “That’s more important than [an order from] the CFO’s office. That’s product-driven.”

Trust Before Instant

There are some holdouts to instant payouts. The PYMNTS study found two-thirds of consumers who opted out of instant payments as a payout option did so over concerns about sharing bank account credentials and card data with the sender. Webster admitted that a marketplace on which she sells various products requires bank account credentials for instant payouts of her sales and she opts not to provide them. Her payout default? A check that costs her $10 to receive, an option that Edwards joked meant that she was “paying for slow.”

Jokes aside, building trust is important, particularly if the sender is a brand that consumers may use but not entirely trust with their payment credentials.

“If you’ll remember, Mastercard and Visa had to cross this trust issue to get people to even adopt debit,” Edwards said. “What unlocked adoption was only being liable for $50 if somebody stole all your money. But trust is a funny thing, and people, depending on their age and where they grew up and what industry they’re in, have different things that spook them.”

See also: Instant Disbursements Adoption Struggles Due to Data Security Fears and Fees

When It Absolutely, Positively Has to Be There in an Instant

There’s no greater proof point for the value of a product than a willingness to pay extra to get access to it. Although a growing proportion of consumers now expect instant to be free, more like an embedded part of their payout experience, there are payment use cases in which consumers are willing to pay for immediate access to funds.

Disbursement types for which consumers are willing to pay to receive them instantly include loans and borrowing (52%), insurance disbursements (41%), income and earnings (39%), and product purchase-related disbursements (37%).

It comes down to need, Edwards said.

“Is it really important that you get it right now?” he said. “I think PayPal and all those guys have proven that out by offering that choice. Do you want the money tomorrow for free, or do you want to pay a fee and get it right now? I know it’s really consistent, the group of people that will willingly pay the fee because it matters, and the ones that will go, ‘Nah, I’ll wait.’ I think that’s up to us in the industry to make those choices available. Some people will pay for speed because they need it.”

And as PYMNTS’ latest “Money Mobility Index” noted, providing choice is a prime differentiator between top and bottom performers. We found that issuers offering six or more instant payment methods, either for money in or out, earn an average index score of 59.5, while those offering two or fewer instant methods earn an average score of just 50.6.

That spread can be a decisive factor in consumer and end-user satisfaction.

“The more choices we can give and let consumers make their own decisions, the better,” Edwards said, “but there will always be a percentage of the population that needs it faster, and that’s valuable to them.”