U.S. consumers don’t exactly love the paper check — roughly 38 percent report that they’ve stopped using them entirely, and that shoots up to almost 50 percent when talking about millennials. But just because fewer consumers are writing checks doesn’t mean they never have to deal with them, Anne Evers, vice president of prepaid and disbursements at Fiserv, told PYMNTS in a recent conversation.
She said the odds are good that consumers will occasionally get payouts from government agencies or merchants — for refunds, claims, pay, government benefits and the like — via a check in the mail, whether they want one or not. But Evers added that the power of paper disbursements has been waning, especially in the past few months amid COVID-19.
“Technology and consumer demand have been moving payouts toward digital in recent years, and well over half of consumers receiving a payout want an electronic option,” she said. “Payroll has been trending toward electronic distribution for some time. Consumers [want] electronic access to their funds that is easily accessible and frictionless.”
Evers said that desire has only become more pointed as consumers have been homebound due to COVID-19 and are looking for digitized solutions to help them complete everyday tasks. Some 70 percent of consumers report wanting an instant payout option (defined as within five seconds), while 44 percent say they’re willing to pay a small fee to access their money instantly and electronically.
“The idea that businesses are still using checks for the consumers who then need to cash them … not only feels more antiquated but in the time of COVID-19, [it feels] particularly restrictive for consumers,” Evers said. “In our digital-first world, the ability to quickly lower costs while giving customers and employees quick access to their funds can be a really big differentiator for businesses.”
As she noted, that will only get more important as consumers continue to drive toward digital commerce in a post-pandemic world.
Direct Deposit Isn’t Enough
Evers said the goal for the payor should always be to build flexibility into how and when the payee receives funds.
“Historically, that’s been challenging for businesses, because it requires the payor to manage multiple payment methods,” she said. “The challenge is being able to do so without burdening the business, and do so in a way that still allows consumers to select and manage their own payment methods based on what works best for them.”
That requires some wide casting of the net when it comes to considering payout options, said Evers, adding that organizations will often think they have it covered because they have something in place, like direct deposit.
But that’s a start rather than a finish, Evers said, noting that direct deposit only works for customers with traditional bank accounts and debit cards that can be used as a proxy for pushing funds to the consumer. Payors need to broaden that approach to accommodate someone without a traditional banking relationship who uses a prepaid card or digital wallet instead.
“Going electronic can sometimes lead customers who don’t have a traditional banking relationship to feel excluded, and [that’s] really important to consider,” Evers said. “It’s one thing to have a limited electronic option available — that’s quite different than having a strong digital strategy.”
“It’s crucial to have options that appeal to a wide variety in your customer base, from an early adopter of a digital banking relationship all the way to somebody who does not want or cannot have a traditional banking relationship,” she noted. “I think especially in times of crisis, we have to look at what a sound digital payout strategy can do.”
Boosting Profits With A Well-Designed System
Evers added that it’s also important for payors to have an instant payments option. After all, there’s no shortage of examples where the ability to tie in an instant electronic payment method is not only relevant to improving the consumer experience, but also to making an entire operation run better.
Businesses that work with the right provider can consolidate payouts and other back-end processes like security and fraud, compliance services and tailored customer communications. As Evers pointed out, companies that do this can actually increase profits by up to 60 percent “just by simplifying the business operations.”
As the world has learned over the past several months, there will be high-pressure situations and crises where it’s especially important to give a company’s customers or employees instant, electronic access to their funds.
For example, Evers said Fiserv recently worked with a large restaurant chain that had to quickly move to pay tips from credit card purchases to employees’ using prepaid payroll cards instead of cash because, due to COVID19 restrictions, the company had very limited cash on hand.
“There are situations — whether it’s our current health crisis or even weather-related crises that we face periodically — where it’s really important for your customers or employees to be able to access their funds electronically,” she said.