Growth of ACH and DDA is Powering On-Demand Industry, Zipmark CEO Says

The PYMNTS team caught up with experts in the payments field to ask them their views on industry trends, predictions for the coming year and what their ideal payments system looks like — and how far off that vision is.

Here’s what Jay Bhattacharya, Co-founder and CEO at Zipmark had to say.

PYMNTS: WHAT ARE THE BIG TRENDS YOU’RE SEEING IN PAYMENTS IN 2015? HOW HAVE THEY CHALLENGED YOUR BUSINESS?

JB: Our company focusses on payments that would typically be handled with a wire transfer and ACH or paper check and so we are a very specific kind of payments platform. We are not card payments platform; we are consumer payments platform. We specifically work with businesses that have those needs.

What we found in the last 18-24 months is that the need for disbursements to bank accounts – that’s commonly known as direct deposit has exploded. It used to be the domain of payroll companies and large procurement type platforms and now there are companies with two employees that suddenly need to make payments out because they are platform for on-demand work of some kind or another or they might run a merchandise ecommerce site where people can sell their goods and so this need to disburse funds has exploded.

And its largely because of two things that we see this. One is that what used to be 101 transactions like in MyPay and myDriver that have become intermediated transactions, where I pay another organization and that organization then goes and pays the person that actually delivered the service so this on-demand labor services is a huge-huge category for us. And what’s interesting about these companies is that they are new to making payments. There’s lots of solutions for them to take payments. There’s lots of companies that have blazed the trail from PayPal to Braintree to Stripe where if you run an online platform and accept credit cards probably in like 5-10 minutes – you get up and running.

But there’s not anything like that to go and make bank payments. Bank payments are complex, they are archaic and what we try to do is bring them upto a standard where people can actually implement them without having to take on all of the owners’ task of implementing the task of compliance and KYC.

The other area that we are focusing on right now and is growing in volume enormously is around online lenders. What we found was that there are lots and lots of online lenders now of different kinds mostly in business lending and these guys need are full service payment platform so they can go to their bank and get standard bank services. They can submit a file until 5 PM ET, but these are online lenders. The idea is that a business owner will go work the day and then in the evening when he has had dinner with his family will go and apply for a loan. But the traditional banking hours don’t really work for these guys. So what we try to do is we work with banks across the country and we are able to process payments late into the evening. So someone who is approved for a loan as late as 8PM/9PM ET will get funds into their bank account, the following day. And so we are offering these guys the ability to extend their business day to match up with their market demands. If you get approved for a loan on Thursday night today, its very possible that as a business owner you won’t see that money until Monday. Which is not really an acceptable user experience from our perspective. And its the case with a lot of our clients. They don’t want bad user experience

PYMNTS: HOW MUCH OF THAT RISK AFFECTS YOU?

JB: The reason that there is traction for our product is because there is this risk around compliance and regulation. A lot of times when I talk to companies that are looking at our product are doing this manually, disbursing funds manually and maybe not collecting enough information from their payees. One of the things that I tell them is that you are a target for money laundering.  It’s really easy to use your platform, which is a two-way platform. I can push money into it and I can get money out of it. And I can use the platform to launder money pretty easily unless you’ll install some gateways from both sides. The card side of it is pretty locked up as I mentioned before. But making sure that the money gets to the right person that’s what we focus on.

PYMNTS: WHAT ARE TRENDS YOU EXPECT TO EMERGE IN 2016? HOW WILL PAYMENTS TECHNOLOGY CHANGE?

JB: Our service is built on the banking infrastructure. One of the big things that is happening in 2016 is that we are really excited about is the advent of same day ACH that all of our clients would be able to take advantage of that as we work with banks that are on the ACH rails and processor transactions as ACH credits. What that means is that not only will we be able to provide next day funding for our clients, but many of them that submit files, that submit payments through the day – they will be able to get their client their money on their bank accounts on that same day which is a huge-hUge difference. When you look at the freelance and online labor platforms, they are competing for the best service provider. [bctt tweet=”Being good at payments is quickly becoming one of the things that attracts the best providers.”] If you are a driver, you are gonna work with the platform that pays you the quickest and always has the most reliable payments. We believe, that as a competitive advantage that’s gonna continue to grow in value and people will need services like that and we are excited about it.

In terms of online lending, I think, that area is going to continue to grow dramatically — different types of loans, different types of structures for those loans and see the volume of those loans increasing exponentially over the course of 2016. I think, there’s going to be a shift towards low value loans where you can quickly get a bridge to the next week or something like that. There’s a lot of receivables financing type options that are coming in. We are applying our product to those platforms as well.

PYMNTS: WHAT ABOUT GROWTH IN CROWDFUNDING? 

JB: In 2016, there would be an advent of new identity services and new tracking and new data services, which will allow a lot of the competing incumbent platforms to rise up. I think that what we are seeing also is the verticalization of crowd funders as well so if I have a particular project, I would go to a particular site where they might ask me specific questions about what I am doing and kind of gain some certainty around the outcome of crowdfunding campaign that way. We like that as an opportunity. We have our business development team focusing on the companies that are approaching the market that way.

Jay Bhattacharya is the Co-founder and CEO of Zipmark, a NYC based payments company whose platform enables businesses to easily make or accept payments from US checking accounts, replacing paper checks, wires and traditional ACH.