Writing the Instant Payments Playbook
The Dawn Of Instant Payments
The majority of small businesses fail because they can’t match accounts payable with accounts receivable. It’s the same for people. From SMBs to individuals and families, financial health comes down to cash flow. That fact – along with timing and technology – has brought us to the brink of a historic moment when “instant” money changes payments forever.
Instant is already bringing change to millions in the consumer and SMB worlds. As clearly shown in the latest edition of the PYMNTS Disbursement Tracker, real-time payments is changing the landscape in fundamental ways. And there’s no putting this genie back into the bottle.
In 2017, only about one-third of consumers surveyed had ever heard of something called an “instant payment.” Then P2P apps quickly filtered into the marketplace, mostly through word of mouth. Just two years later, 64 percent of consumers have heard of instant – and they like what they hear. In fact, 90 percent of people opt into instant payments the second they can. Even so, there are still about 10 percent who prefer paper checks. That’s their choice… there really is no one choice that solves for everyone, so we need options.
Ready for the Revolution
It’s revolutionary for sure, but we’re not in an absolute instant rebellion just yet. That will require more collaborative ecosystems where financial institutions (FIs), FinTechs, vendors and other significant players embrace standards and firm up offerings.
Given the tangle of rails now being modified, retasked or built from scratch – along with the search for optimal monetization models – it’s anybody’s game at the moment. And for all the FinTech disruption, traditional banks and credit unions will be glad to know that they’re set up better than almost anyone for this transformation.
Traditional FIs issue cards from a variety of account types, as well as ACH and wire transfer services with fee structures in place, and have the treasury infrastructure to manage it all. The first banks to market with new offerings (like one-to-many instant payments) can expect joyful satisfaction surveys and a healthy group of potential partners.
Not that it’s going to be easy. The best-positioned players have already spent years working on precursor technologies like push payments, and dynamic platform solutions that bring together the smart backend needed to handle the approaching torrent of real-time payments, instant credit and more.
And don’t forget that lurking in the shadows of this bright new day are the cybercrooks – an unwelcome but inevitable part of the equation. Banks and FIs want to move fast as customers clamor for instant, but security can’t take a back seat to a safe experience.
Instant Means Now
Platforms and card networks have their work cut out for them with compliance, consumer protection and new services. Instant B2B payments is next, and with it comes more complex issues.
Customizing instant payments for a constellation of SMBs will also take some doing. Changes happening elsewhere in payments (like so-called “daily pay benefits,” to name one) will use instant money to permanently alter the idea of “payday.”
Make no mistake: this is happening now. While FIs and FinTechs figure out how to profit from instant money, they should remember that it’s really a consumer movement. FIs are being pushed along on a tide of consumer delight, enabled by technology, but riding the wave won’t cut it. Companies that want a future in this space need to get into it, and get instant.
Tune into the podcast on PYMNTS.com, “Getting Payors On Board The Instant Payments Bandwagon”