I needed a few outdoor cushions earlier this season and hired a local upholstery shop to make them. This small business is a really small business: a guy working out of a teeny tiny storefront in a little town north of Boston. The shop came highly recommended for the quality of his work and high service levels. The sole proprietor is a hard-working immigrant who’s been in business in this town for 20 years.
He delivered my cushions, as promised, about a month ago. The product was exceptional. The handwritten invoice he left with my cushions included his name, his mobile phone number and the payment methods he accepted: cash or check. Like many small businesses (SMBs), he doesn’t accept cards. The invoice amount was less than $500.
He’s still waiting for his money: not because I haven’t tried to pay him over the last month, but because how I have tried to pay has failed him, and me.
When I got the invoice, I panicked a little. I haven’t had paper checks in the house in more than a year, and no one would be back at the house for another week to give him cash. So, I called and asked whether he would accept payment via my bank app and his mobile phone number.
He seemed confused at first — obviously no one had ever tried to pay him this way — but I explained how it would work. I also told him it was easy — once he got the message via text, all he needed to do was click on the link and he would be given instructions for how to accept the deposit.
I had a sense there might be a problem when I was notified via text a day later that he had not picked up the money. I texted to remind him to click on the message and follow the instructions. He said he needed to go to his bank to get help since when he clicked, he didn’t know what to do.
In the meantime, I gave him a few more items to upholster, which were delivered this past weekend, along with a new invoice for that work — plus the balance from the first invoice.
He said when he went to his bank — a small one — to ask for help, he was told the bank didn’t support this type of payment and to return the next day when the manager was back. This was not a payment going to a business bank account but to his personal account, which probably does double duty as his business bank account for all I know.
Neither he nor his bank could figure out how to connect his account in order to accept my payment. Zelle hadn’t yet reached this small bank, and the instructions for how to enable that deposit weren’t clear enough for he or his bank to navigate. At least that’s what I understood from the conversations he had at the bank and relayed back to me.
Since he had other options for how to receive payment from me, he dropped it with his bank.
He has a PayPal account, so that’s how I’ll pay him today.
All of you reading this probably bank at one of the 18 big banks that are part of this network and are thinking, “What’s the big deal?” and “You must be dealing with someone pretty unsophisticated who banks at a podunk little bank.”
That would ignore the fact that there’s a huge swath of SMBs who operate just like him and bank at one of the 13,198 banks that have not yet connected to the Zelle network — lots of them very small.
I tell you this story not to criticize the Zelle network — I use it, and it’s great when it works — nor the efforts on the company’s part to create efficient ways to pay, nor to minimize the slog that it is to connect to every single small bank in the country to create those easy and seamless experiences. Or to buff up PayPal.
But to remind all of us that payment innovations are only as good as the certainty those innovations deliver to their intended users.
Uncertainty, particularly when it comes to people’s money, creates confusion, and confusion creates distress.
And when that happens, humans default to what they know is certain — whether they are running treasury ops for the biggest company in the world or a little upholstery shop on the North Shore of Boston (out $500 now for a month).
The Dislike of the Unknown
It’s easy to assume from my example that ubiquity and certainty are two sides of the same coin, but that’s not my point.
Like most adults in the U.S., my upholstery guy has a bank account and, in theory, sending him money via a peer-to-peer (P2P) network that can enable receipt across any bank in the U.S. seemed like a no-brainer.
But it’s not that simple, at least not yet. And the outcome is far from certain.
Knowing that one out of every two people with bank accounts will likely encounter enough friction if their bank isn’t part of the P2P network to abandon the transaction creates uncertainty for me — and probably other senders like me too who may have had a similar experience.
Lots of people worldwide may have PayPal accounts — 250 million at last count — but many more have bank accounts: About 230 million adults in the U.S. have a bank account — some 93 percent of the adult population.
The outcome, however, using PayPal, is more certain for both the sender and the receiver. People with a PayPal account know how to accept money and then transfer it to their bank account if that is what they choose to do.
People with a bank account that’s not attached to the Zelle network may not have that certainty, even if they have a way to enable their bank account to accept a transfer of funds.
So, when someone I want to pay has PayPal, we both know it will work. When someone I want to pay has a bank account, neither one of us knows, just from that fact, that it will work.
That lack of certainty will guide my decision about what to use when sending money to people going forward. It means the question I might ask (instead of whether I can use their mobile number to send money to their bank account) is whether they have a PayPal account I can send money to instead.
When there isn’t ubiquity, which creates certainty, uncertainty rules.
Certainty as a Catalyst for Change
Ubiquity, of course, is payments nirvana. It’s why Visa and Mastercard are such powerful global brands. Consumers know that payment methods bearing their brand are accepted at tens of millions of merchants globally and that when they use those products, they work reliably.
That creates certainty.
Retail payments innovators have tapped into that ubiquity-driven certainty to enable new use cases that extend their reach.
PayPal and Amazon enable users to attach Visa- and Mastercard-branded payment methods to their accounts and to use them as the funding source when transacting on sites where their buttons are accepted, eliminating the need to enter card credentials on sites they may not know. Seeing those “buy buttons” on websites is a cue that on websites and within the marketplaces where those buttons are accepted, the payments experience is certain and secure.
Processers enable push payments via a debit card as an alias, giving companies new options and the certainty of getting money instantly into the bank accounts of their customers.
We see similar dynamics at play in the B2B payments space around the notion of real-time payments.
Every business has a bank account, and big businesses have many more than one. The bank account is the ubiquitous funding source used by trading partners to pay each other.
The notion of moving those funds faster between the bank accounts of those trading partners is driving a slew of innovation and investment across bank and non-bank network rails today.
But all else equal, that’s not what treasurers and cash managers say they value the most today. Certainty of good funds is what they need to plan their cash position, as is the certainty that the funds moving across the networks are secure.
Ubiquity can also be redefined by certainty.
Innovations that provide that transparency, predictability and security today are valued just as much, if not more than, the speed at which those funds move.
Banks, knowing this, are working through the cost/benefit analysis of making investments in real-time systems when the corporates they are serving have prioritized other things as more pressing. This is happening at the same time that other payments options are emerging — or have emerged — that enable a more certain, faster payments outcome in a more cost-effective manner.
Just like we’re seeing on the retail side of payments, innovators are leveraging the ubiquity of the business bank account to build solutions that deliver the certainty that corporates say they want and need when making and receiving payments from other businesses and making those funds move faster as well.
Same Day ACH leverages existing rails to enable same-day funds availability, discussing options to expand their settlement windows. Innovators are using existing rails, new technologies and new fraud and risk models to push funds into merchant accounts the instant sales are made. Others are taking on the heavy lift of integrating with messaging standards and financial institutions so neither they nor the corporates they serve have to do so.
Making the Unknown Certain
Certainty can also build the trust that can become the catalyst for change.
It’s been proven scientifically that most people dislike the unknown — sometimes so much so that it becomes debilitating. Some people thrive on the unknown; they like the risk, love the thrill. But most of us don’t. Aside from the occasional trip to Vegas, we like certainty in our daily lives.
Often people rely on people they know and trust to get them over the hump. Their own experiences, of course (good and bad), are the final judge and jury.
I’ve been writing and speaking about the significance of certainty and payments innovation for the last five years. It’s a concept that’s often marginalized by many innovators, even downplayed by the incumbent players who’ve been the source of that certainty for many years.
Innovators often think that most people will see past their fear of the unknown because their new way of doing business is modern and high-tech and delivers a better outcome.
Only if that better outcome is also one that delivers certainty.
There will always be those who embrace uncertainty as the motivation to try something new.
But the more innovative the experience, the less likely people — business people and consumers — are willing to try it unless it’s connected to a brand they know and trust for enabling a reliable, safe and secure similar experience.
It’s why consumers default to paying with plastic in a store even if they’re holding a mobile wallet in their other hand.
It’s why more than half of all B2B payments in the U.S. are still made using a paper check.
It’s why, regardless of whether you’re a sole proprietor who makes cushion covers or the treasurer managing the cash position of a Fortune 500 company, your appetite for payments innovation is the same: Show me the certainty, and I’ll show you the money.