Money being waited on is not money being spent.
As Ingo Money CEO Drew Edwards noted, a person waiting for money — whether it’s from a paycheck, an insurance disbursement or a loan — probably needs that money. The reality is that many businesses still pay out those funds using checks with multiple-day holds. The goal, according to Edwards, should be to make it as easy and efficient as possible for consumers and small businesses to get their funds.
It’s the essence behind the news that Ingo — in partnership with OnDeck and Visa — released yesterday (Oct. 23). The company announced that going forward, borrowers using OnDeck’s SMB lending marketplace will be able to collect their funds via their debit cards in real time.
“Online lending is one of the most natural use cases for our services, because the entire business model is built around efficiency and speed,” Edwards said, noting that online lenders enable borrowers to skip going to the bank branch and avoid gathering reams of paperwork.
In that more streamlined world — where technology and algorithms automate the work of manual underwriting — borrower can get decisions in minutes, as opposed to days or weeks.
“[But] then once that great experience is over, they get to wait, sometimes for as much as a week, to actually get their hands on that money," noted Edwards.
That is a mismatch — and one that Ingo, leveraging the power of Visa Direct, can help overcome.
The Power of Instant
In the world of payments, Edwards noted, even “same-day” ACH can be slow. That's because to a bank, it really means “after debit and credit posts” at night — hence that same-day payment is actually sometime the next day, assuming the next day is a business day.
With Ingo Money's solution, if a loan is approved on OnDeck at 1:00 p.m., the borrower can key in their business debit card number at 1:01 p.m. — and by 1:02 p.m., the money is in the account, ready to spend.
According to a recent study, about 70 percent of small business owners say they have a debit card, and of those who do not have one, 87 percent reported that the ability to receive instant funds transfers would be a good reason to get one.
“There is a very big difference to a small business, restaurant, etc., struggling with cash flow, between tomorrow and today," Edwards noted. "And many of these lenders, like OnDeck, are setting up lines of credit for small businesses, where it isn’t just borrowing a lump $25 thousand sum. Instead of a $25K line where they can look at their books and realize they need a thousand, with what we are launching, they can push a button, and it’s there.”
The option merchants have today in its place, Edwards noted, is something like a merchant cash advance that, unfortunately, comes at a much higher cost. This new option offers the same level of flexibility, but at a much more reasonable rate.
OnDeck gets to offer a more attractive, competitive loan product, without much upping their own costs, Edwards noted.
And the boost to OnDeck’s reputation as cutting edge doesn’t hurt much, either — a sentiment echoed by OnDeck CEO Noah Breslow.
“By partnering with Ingo Money and Visa to deliver real-time capital to our customers, we will empower small businesses in the next decade to achieve their goals with the fastest and most flexible credit solutions in the market,” Breslow noted.
The Importance of Visa
Ingo Money was the original use case of Visa’s Original Credit Transactions — or OCTs — the program that, as of this year, grew to become Visa Direct.
It’s a very powerful set of tools, Edwards noted, but one that also requires a great deal of technology prowess to, well, go direct. Ingo’s platform, Edwards said, is able to give OnDeck all of the benefits of instant disbursements without having to do all of the heavy lifting.
“We have handled authentication, and the risk management and the settlement, so that all that our partners need to do is just start pushing payments," he added.