Ad hoc payments, which are irregular payments made outside of normal invoicing and payroll processes, can be a hassle for enterprises.
However, a survey revealed that instant payment methods offer a viable solution to streamline these payments.
The PYMNTS Intelligence report “Streamlining Ad Hoc Payments With Instant Pay” drew on insights from a survey of 200 enterprise senders generating at least $50 million in annual revenue to examine their use of instant payments to make disbursements to consumers and small- to medium-sized businesses (SMBs).
According to the report, ad hoc payments account for 24% of accounts payable (AP) volume for enterprise senders, amounting to approximately $12 million out of a total of almost $49 million processed monthly. These payments are typically made to SMBs and consumers in industries such as transportation, hospitality, property management, gaming and the gig economy.
In terms of ad hoc payment types, the property management industry receives most ad hoc payments, with more than 80% of senders paying for upkeep or repairs in the past year, and 93% of senders making payments to property owners.
The second most prevalent type of ad hoc payment is gaming winnings payouts, which are made by 80% of gaming companies. These payouts are followed by payments made to fuel providers (78%) and by transportation/trucking companies to drivers (73%).
Additionally, enterprise senders are the least likely to make ad hoc tip payments to service workers and gaming employees, with 23% in the hospitality sector and 20% in the gaming sector, respectively, doing so. And while industries such as gaming and hospitality still rely more on non-instant methods for ad hoc payments, the overall trend is toward increasing use of instant payment methods.
Per the research, instant payments now represent nearly 30% of senders’ ad hoc payment transactions, translating to over $3 million in transactions for the average firm. Gig economy companies, which make an above-average share of ad hoc AP payments, are the most likely to use instant payment methods, at 31%.
While bank account transfers continue to be the dominant method for ad hoc payments, there is untapped potential for increased use of instant payment alternatives to streamline the process. Larger enterprises, in particular, reported that instant payments represent a share of their ad hoc transactions.
However, the use of ad hoc payments comes with its set of challenges, including unmet customer preferences and processing frictions, such as loss or missing invoices. Nevertheless, digital instant payment solutions offer a viable means to address these issues and reduce costs, especially for senders relying on manual systems.
Improving customer relationships is a primary focus for senders, with 80% believing receivers are satisfied with current ad hoc solutions. However, one-third of senders aim to enhance customer satisfaction by introducing new ad hoc payment solutions. In this context, instant payments stand out as an appealing choice for senders, offering improved customer relationships and the guarantee of secure funds.