The adoption of faster payment systems is a worldwide trend, with more than 40 countries now offering their own schemes. The following Deep Dive that explores how faster payment systems are ushering in changes to both B2B and B2C businesses.
Faster payments systems are popping up around the globe in regions like Singapore, the U.K., Australia and the U.S., and as they become more prevalent, they’re changing not just the pace at which businesses operate — they’re also providing businesses with an alternative way to conduct business.
A recent report from FIS found that 40 real-time payment systems are currently active worldwide — up from 25 last year. The same report noted that five other real-time systems are currently under development, and another 16 are on track to go live in the next 12 to 18 months.
Hong Kong recently launched its always-on Faster Payment System (FPS), which has connected to 20 banks and eight electronic payment operators. The system benefits businesses by enabling real-time settlements, allowing these companies access to faster cash flows.
Recent developments in the U.S. indicate that access to faster payments is on track to expand even further. The Federal Reserve recently released a proposal for a new settlement system for faster payments. Meanwhile, another payment service, The Clearing House (TCH), launched its Real-Time Payments (RTP) network last year. The network has seen impressive growth since its launch and TCH is anticipating additional growth over the next year.
As faster payments systems continue to become popular, banks and FIs are under pressure to invest in solutions that can help their corporate customers make B2B payments, while improving how consumers send and receive money. As a result, many are looking for opportunities to maximize their networks’ capabilities.
The following Deep Dive looks at how the rise of faster payments is impacting the traditional models in both the B2B and business-to-consumer (B2C) sectors, and how that speed is influencing and informing smarter evolutions of these models.
Faster Payments, Better Business
As payments continue to become faster, corporates are increasingly pursuing the most effective opportunities to make use of these services. By tapping into real-time payment capabilities, banks can develop payment tools specifically geared toward corporate customers that offer the same simplicity and customer experiences provided by mobile payment technology.
One of the most likely use cases for B2B payments could be just-in-time payments, which allow businesses to determine exactly when they make a payment and when it will be delivered. This information is particularly useful for smaller businesses that have less capital on hand and want to exercise greater control over exactly when a payment should be delivered. A 2015 report found these types of payments were valued at $11 billion in the U.S. alone.
Because payments are settling faster, companies are able to access funds more quickly. This means small businesses don’t have to wait as long to access earnings from sales. A recent collaboration between Paysafe and Ingo Money could even help roughly 250,000 U.K. merchants get access to the funds from their sales on the same day they are paid. Use cases like this could soon become more prevalent among small businesses as SMBs seek faster access to their revenues.
Faster payments can also change the way businesses pay employees. Financial services giant Visa, for example, recently announced a partnership with delivery marketplace Postmates, enabling the company to pay its approximately 200,000 workers in real time. The service will use Stripe’s Instant Payouts and Visa’s real-time push payment platform.
In the U.S., corporates could change traditionalbusiness operations now that Same Day ACH (SDA) is available. PYMNTS’ Corporate Survey, published earlier this year, found that 59 percent of corporates have plans to increase their use of SDA credits, while 40 percent plan to rely more on SDA credits instead of paper checks.
In other words, faster payment systems are likely to bring significant changes to the way business issue payments.
The Business Of Consumer Payments
Faster payments are also demonstrating promise in the B2C sphere, particularly in the insurance market, which could see significant changes for how consumers access payouts.
With faster payments capabilities in place, insurance claim adjusters can quickly review the damage to a vehicle or property and authorize a claim from their smartphones. This would spare the consumer weeks of waiting for a paper check to arrive in the mail.
Travel insurance is another market seeing faster payments take flight. Insurance provider Allianz, for instance, recently launched SmartBenefits, which prompts travelers for payment information in the event that a flight is cancelled. The program offers same-day disbursements to help travelers get their plans back on track.
Allstate is also stepping up its efforts, helping consumers access auto insurance claims more quickly with QuickCard Pay, which allows customers to receive payments for claims instantly, giving them access to the funds they need to repair their vehicles following an accident.
Workers in the caregiving field, including babysitters, pet sitters and home sitters, can also access funds more quickly through electronic payments, rather than relying on cash. Care.com’s vice president of payments told PYMNTS last year that faster payments are putting caregivers on a path to legitimacy by offering simpler access to benefits like healthcare and tuition payments.
Whether in the B2C or B2B arena, the availability of faster payments is doing more than simply inviting a quicker delivery of funds. It’s also enabling businesses and markets to transform old models into new structures that make the most of digital payment technologies and faster payment deliveries. As the speed of payments continues to quicken, businesses large and small are realizing they need business models that maximize the potential of faster payments.
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