The payments industry loves to talk about rails — whose rails are the fastest, cheapest, most secure, most accepted, most compliant. Consumers? Not so much.
Except when it boils down to a single question: “How/when do I get my money?”
Nobody cares what rails are used any more than I care which wires or satellites transmit my phone call to you.
What customers do care about is the experience — how fast the funds arrive, how easy it was to complete, did the money end up in an account where the person could immediately use it, and did they have a choice in how to receive those funds.
Delivering that experience means more than just moving money faster into bank accounts or digital wallets.
Unfortunately, for all too many senders, that experience remains a work in process.
From the Appearance of Instant to the Reality of Instant
Simply writing the word instant on a box of traditional oatmeal or rice does not make either cook faster. Similarly, consumers are growing wise to the fact that simply communicating that funds will arrive does not make a payment instant.
Even in some cases where funds are pushed to the consumer and made available for instant use, money is still not moving in real time — at least not yet, depending on which rails are used. For example, push to debit card options might put money into the bank account of a consumer or small to medium-sized business (SMB) instantly, with settlement actually happening a day or two later.
Real-time availability of funds and real-time settlement of funds are two different things.
Enablers of instantly available money assume the risk between the time when they make funds ready for use and when settlement eventually happens days later. That’s particularly true when funds are irrevocable.
Conversely, real-time settlement would mean fully guaranteed funds are made instantly available. There is no interim period of risk where the provider is on the hook for bad transactions or missing funds.
Although long-promised real-time infrastructure would close the gap between instantly available and instantly settled funds, that reality is still years away. Fortunately, payors and the channels that serve them don’t have to wait for regulators and others to establish this revamped system.
There are enough rails in place today to provide the ubiquity, choice and instant access to funds that consumers crave. These existing rails deliver the speed and the experience that allow payors to build trust with the consumers and SMBs they pay.
Solving the “One to Many” Payments Puzzle
Every payment begins with a bank account or wallet and ends in one. The challenge is that there are a myriad number of rail systems connecting these accounts. For FIs, corporates, and other payors that want to take advantage of today’s true instant payment capabilities, the key is creating a universal “one to many” capability.
This is because many existing payment rails are branded or owned properties that disburse funds only to cards or accounts on their system. In order for a payment to have universal connectivity and an ability to pay into any account, it must be able to move across networks and systems, each of which have their own set of technologies, risks, and regulations.
This universal capability requires a third-party provider like Ingo Money that has built an industry-first disbursements marketplace, a network of networks through partnerships with all types and sizes of providers. Tapping an agnostic partner like this ensures compatibility and provides transparency, reliability, and automated reconciliation.
In practice, the Ingo Money marketplace creates an environment in which issuers and rails compete for disbursements volume and dollars. This competition then delivers value for the consumers and other participants in the marketplace. Ultimately, it helps realize the promise of a modern payments experience wherein consumers can choose how they want to be paid, on-demand 24/7/365.
Tune into the podcast on PYMNTS.com, Bridging Instant Payments’ Perception/Reality Gap