Why Digital Disbursements Need More Than Speed

When it comes to payments, consumers overwhelming prefer them to be faster. It’s a trend visible in the latest edition of the PYMNTS/Ingo Money Disbursements tracker, where three-quarters of consumers responded that they actively wanted faster payments.

It is also the conclusion of common sense, Ingo CEO Drew Edwards noted in a recent conversation with Karen Webster. He noted that while every contractor and service provider in his life prefers a different payment method — checks, cash, credit cards, PayPal, Zelle, etc. — they are all in united agreement that they’d like to be paid as soon as possible.

The surprising part of the data isn’t the overwhelming majority of consumers who prefer faster payments, Edwards said, it’s the size of the minority who don’t seem to care about it.

“It’s almost a nutty question right? Like ‘hey, you wanna get your money in a week, or would like to have it right now in your bank account?’ Who’s out there saying they want it in a week?”

But the bigger question is, if consumers want it so desperately — and it is obviously in a firm’s interest to give consumers what they want — what can’t they just have their payments faster?

Edwards noted there are two areas of explanation. The first should be familiar to PYMNTS readers — change in the payments industry is always and everywhere slow.

“The goods news is, change is coming. The bad news is I may die of old age by the time it fully gets here,” Edwards said, noting that 22 billion checks a year aren’t getting created because businesses love them, but because their systems are “rooted in that process.”

But the second, less obvious issue is that faster payments don’t exist in a vacuum — and giving the customer what they want is a little more complicated than flipping on the faster payments switch and letting the magic happen. Faster is part of a user experience, Edwards said, but not the entirety of it — and the future of faster payments and disbursements in general, he noted, is in building that better optimized total payments experience.

Keeping It Simple

If one hops over to the world of retail payments, Edwards noted, and looks at Apple Pay’s trajectory over the last few years, there’s an object lesson for disbursements to take away.  Apple Pay, Edwards noted, is a good experience, in fact it’s an improvement on using a card in many ways.

But the reality, he said, is it’s easy for customers to use a card — in some ways easier than using Apple Pay.  It works, they’re confident about it working, they can use it to maximize rewards offerings or points benefits — in short, using a card is easy.  Addictively easy, as it turns out, and so it’s what consumers default to doing. Changing that behavior and re-centering it around a phone, he noted, has shaped up to be a massive challenge.

The lesson for disbursements, he noted, is all about easy — and about building digital alternatives that “have to be so easy as to become second nature.”

The second it becomes hard, or requires them to remember an obscure credential, or go through a complicated process, the consumer is likely to bail out and go back to the default of “just send me a check,” despite the fact that it’s most costly for the business to pay them that way and a longer, less convenient wait for the consumer.

“It’s good that there are going to be multiple ways to move money out of bank accounts. The question for us is how do we create the best digital experience that causes the consumer to say don’t just send me a check. We have to make it really easy for them to pick a digital way to complete that digital transaction in a second.”

When offered those options, Edwards noted, options that aren’t just fast but smooth as well, they’ll choose them.  In some contexts, he noted, they will, in fact willingly pay for it and “the industry is foolish not to monetize instant payments to cover the costs if it doesn’t bother the consumers.”

In some contexts, he noted, charging for the faster digital payment doesn’t make sense. Insurance providers will pay for it, because it’s a massive cost saving for them and they want to steer their customers away from checks. Lenders will cover the cost of a digital or instant payment, he noted, because instant approval/instant loan funding is an attractive offer for a digital lender to make.  But in a P2P payments scenario, or an SMB service provider or a gig economy worker, he noted, the early rollouts have made it pretty clear that cost isn’t the stumbling block for customers as much as complexity or confusion are.

“People will pay for speed if it is a fee that isn’t egregious to them,” Edward said, so long as they are confident that they really will have usable funds faster. And, he said, as long as they can have those funds paid to them in their desired method.

Prioritizing Choice

American consumers, overall, show a strong preference for choice — and Edwards noted that he doesn’t really see a future where everyone settles in on one method of payments as any more likely than one where we all start driving the same make and model car.

“Digital disbursements experiences are really about figuring out what is in the customer’s wallet and letting them be paid using anything in there.”

The low hanging fruit, he noted, is with the card networks and debit cards, since that captures what the vast majority of consumers are carrying.  It’s also, he noted, what consumers generally represent as their preference, as far as intermediaries go, overwhelmingly. It’s easy, it’s convenient and it’s a highly trusted, branded experiences that consumers have been trained over decades to trust.

“Why not leverage the brand the consumer’s comfortable with to affect real-time payments?” Edwards asked.

For the bulk of customers, he said, that is very likely to be a debit card — a banking relationship is a great place to start in making the entire settlement process faster.  But, he noted, there are customers who are going to prefer PayPal, because that is actually their chosen home base for transactions. Or customers who like a different mobile wallet, or digital banks — the options are proliferating and consumer preferences are beginning to evolve.

In retail, the stores don’t try to pick between the payment preferences — Edwards noted he could barely remember the last time he went to a store that didn’t let him pick his favorite payment method to pay — and disbursements players should start reading from that hymnal.  Let customers pick whatever they want for their disbursement — and then make it easy for them to actually complete the transaction with no friction.

Simple to say, hard to pull off.

But necessary, and becoming more so by the day.