60% of Consumers and Microbusinesses See Instant Payments as Critical to Payor Loyalty 

Small and medium-sized businesses (SMBs) receive more than one-third of their sales through ad hoc payments — infrequent, one-time transactions — PYMNTS research has found. In these transactions, more than 30% of the payments are made late and often more than a month past due.

SMBs traditionally have received payments via paper checks sent through the mail, due to convention and a lack of payment choice. Today, however, SMBs, microbusinesses and consumers are less patient, having experienced faster turnarounds while conducing more business online during the pandemic.

In fact, 60% of consumers and microbusinesses see instant payments as critical to payor loyalty, according to the November/December 2021 Disbursements Tracker, a PYMNTS and Ingo Money collaboration.

The Tide is Shifting Toward Automated Payment Systems 

Ingo Money CEO Drew Edwards told PYMNTS that the tide is slowly shifting toward replacing paper checks with automated payment systems for ad hoc payments. For the buyers, this can mean greater efficiency and, ultimately, savings. These savings come not just through a less involved payment process but also through the potential for suppliers to offer discounts in return for instant payments.

Larger buyers also can benefit from the scalability and handling of payments to multiple small suppliers through a single system, Edwards said. A “network of networks” approach can decouple buyers and suppliers, permitting each to pay and be paid in the manner that best suits them.

The speed of payments is particularly important in insurance and loans, an area in which PYMNTS found that 63% of consumers and 71% of microbusinesses said they would be likely to do business if offered free instant disbursements.

Anuj Nayar, financial health officer at LendingClub, told PYMNTS that the three main things borrowers want to know are whether they will get the money, when they get the money and how much the loan will cost them. Whether applying for an auto loan or a personal loan, quickly receiving the money is important to customers across the board.

Products such as balance transfer, in which money is electronically disbursed directly to a creditor, help make the process move more quickly and approvals easier by mitigating the risk of sending money directly to a borrower, Nayar said.

The Digital Trend is Increasing the Speed of Disbursements 

The digital trend has impacted the loan management process, with disbursements and repayments handled electronically through various channels, including bank accounts, eCommerce accounts and mobile wallets. This move not only increases the speed with which funds are disbursed and collected but also provides more opportunities for applicants to receive and repay loans in a manner that best suits their needs.

This is just one example of how technological improvements across the financial sector have revolutionized the industry, and recent events surrounding the pandemic have only accelerated advancements. In response to the changing expectations of an increasingly digital-savvy customer base and the need to improve efficiencies and experiences, the financial sector is increasingly looking to digital solutions. With these improvements, they will better be able to retain the loyalty of their customers, including SMBs, microbusinesses and consumers.