In today’s world, instant is everything. Whether it’s checking a bank account balance or placing an order online, consumers expect fast, convenient and immediate results. When it comes to payments, this couldn’t be more true. Drew Edwards, CEO of Ingo Money, recently joined PYMNTS to share why meeting the customer’s need for instant, guaranteed funds is so critical to the payments industry.
Edwards explained how this massive unmet need is leading to handwringing by the businesses that serve them. In order to realize a $30 trillion opportunity, companies must embrace and deliver on the challenge of instant funds with a system that will fulfill their customers’ expectations.
Here is an excerpt of the conversation.
PYMNTS: How do push payments differ from faster payments?
DE: The idea of fast funds continues to consume an outsized proportion of the industry’s headspace. Steering committees, consortiums, development teams and entire companies are throwing themselves headlong into breathless pursuit of instant payments as a panacea for what ails us. Legacy technology can only go “faster” — it cannot achieve the consumer requirement of “instant” and immediately be available for consumers to spend. Fortunately, the technology is already in place to meet this consumer demand for instant guaranteed funds. For the first time, we have the ability to meet need with solution.
PYMNTS: Why are instant push payments a better solution to meeting the need for faster payments?
DE: Payment card networks already have the rails in place to offer instant payments. Now, a number of individual network solutions like Visa Direct also support a push versus pull of funds so that money can instantly be funded back to a card or account. By joining these one-off networks together, it’s possible to build a ubiquitous push payments solution that delivers complete consumer choice. Best of all, it’s instant, guaranteed and comfortable for the consumer.
Ingo Money was one of the first to use this newfound capability to push paper check proceeds directly into customers’ accounts. Others have also begun to offer P2P capabilities that can push funds directly to a bank or debit card. The reason this has seen such interest and uptake is because the process is so familiar to consumers. They don’t need to carry their checkbook, memorize their bank routing and account numbers, open a bitcoin wallet, or embrace some other type of new technology — all they have to do is use the familiar debit, credit or online wallet. In return they get instant access to their funds that are safe to spend.
PYMTS: Can you describe the market opportunity for push payments? What’s helped it grow to the size it is today?
DE: We have already seen early adoption of push payments within the P2P arena and for limited corporate disbursements by digital-only enterprises like Uber and Airbnb. They enable their customers and contractors to be paid at the push of a button to an account of their choosing. It’s a powerful example of the potential for the capability.
The market potential for this technology is massive. By varying accounts, there is at least $30 trillion of payments in this country right now that can be converted into push payments from cash, checks, and ACH payments. For comparison, this is six times the debit or pull transaction market. Use cases for push payments exist across nearly every industry: contractor payments, P2P, corporate disbursements, loan proceeds, insurance payouts, payroll … the list goes on and on.
PYMNTS: Why should companies offer this capability?
DE: Beyond just serving consumer demands, legacy paper check payors understand that push payments can dramatically cut the costs of issuing paper checks and back office operations — estimated by some to be as high as $10 a check — reduce settlement times to seconds, significantly counter fraud risks and provide loyal consumers with choice and convenience.
PYMNTS: So, who will serve these payment originators and recipients? What will define the winning push payment solutions companies?
DE: Today, the push payments space is roughly divided into two categories of companies: a gateway that can push into the network or an acquirer that sits on top of the gateway. In the long run, is it the card networks game to lose, will one of these current players corner the market or will we see new players emerge to claim the push payments crown?
PYMNTS: What are the three characteristics that will ultimately define the premier providers in push payments?
DE: 1. Ubiquity — One card network does not define push payments. Many more over the coming year will flip their switch and offer funding in reverse, but each is only a portion of the market. Unlike traditional pull transactions where consumers are choice-limited by merchant rules and retail environments, push payments offer the ultimate in consumer flexibility. Using a push payments gateway with total ubiquity across networks, a company can give their customers unrestricted choice of destination accounts for their funds — card accounts, PayPal, Amazon, bank accounts and more.
2. Redundancy — This breadth of endpoints is not only about choice, it’s also about redundancy. Just as in debit transactions, push payments will sometimes fail — processor switches will go down, transactions will time out. And when that happens, service providers must be able to activate a second option systematically to deliver on the promise of instant funds.
Consider — your insurer sends you an immediate email notification that your insurance claim is approved and funds are waiting to be deposited. You click on the portal link and choose your preferred destination account. Behind the scenes, the network has encountered an error and cannot reach the card. A redundant system will automatically reroute the transaction using the card’s supported PIN debit network like Pulse or Star. The consumer experience remains a seamless, instant funding of proceeds because of the provider’s back-end network redundancy, and you remain a loyal insurer customer.
3. Regulatory-compliant processing — Push payment technology providers have to provide more than just API access to payment network rails. Push payment processing requires acquiring bank sponsorship, compliance screens like velocity controls and liability caps, recipient authentication, reconciliation, and settlement.
PYMNTS: What does the future of push payments look like?
DE: As we roll into another Innovation Project event, we are on the bleeding edge of push payments. The Holy Grail is when the legacy paper-based payors like insurance companies, lenders, settlement administrators and global employers activate this capability. Many are currently testing solutions and carving out human and financial resources to achieve the switch, meaning that this reality is just around the corner. Their goal will be to deliver seamless push payments options through multiple sources of funds — customer service, face-to-face interactions, agents in the field and treasury.
When that promise comes to fruition, it will be in a world where consumers can instantly accept wages, personal payments, loans and any other type of payout directly into the account of their choosing with the confidence the funds are safe to spend. This capability will dramatically shake up the market and revitalize a debit transaction marketplace that will now be dwarfed by an opportunity six times larger.
That is the promise of 2017 and beyond: $30 trillion in push payments. A time when Americans will never again hear, “The check’s in the mail.”
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