Payouts. Solved: Deliver Payments Ubiquity

July 16, 2021

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Enabling merchants to accept payments is a straightforward process that offers the customer many options for how they want to get the transaction done. The simplicity and reliability of the process often leads to an erroneous assumption that pushing payments out to a consumer — enabling disbursements — is as easy as taking money in from them.

“In reality, from a disbursements perspective, there are a lot of problems that [an organization] can encounter,” Ingo Money Executive Vice President and Chief Product Officer Lisa McFarland said in a conversation with PYMNTS’ Karen Webster.

“Because there is a lack of maturity in the technology that supports disbursements, there is inconsistency with how issuers treat these transactions,” McFarland explained, pointing to the differing volumes and expectations that exist across the nascent ecosystem as examples.

The Challenges in Delivering Payments

When pondering push payments, originators tend to underestimate the difficulty of their undertaking. The emergence of Visa Direct and Mastercard Send gives businesses the impression that a simple integration to an application programming interface (API) is all that’s needed to make the disbursements magic happen.

“And while that is true in many cases, it’s unfortunately not true in a lot of cases. That payment process is not as clean and seamless as many might expect,” McFarland said.

In fact, she noted, there are a lot of things that can still go wrong when pushing a payment. Network availability and delays can be an issue as outages happen both in the API disbursements networks and at processors downstream.

There are also network idiosyncrasies to manage, she noted, where one primary network provides routing controls that help guide transactions through non-primary networks when needed, but they don’t aggregate settlement. And the other primary network does not provide routing controls but does aggregate settlement.

Most importantly, she said, outbound payments don’t have the critical infrastructure that the well-developed merchant acquiring ecosystem provides globally and at scale.

McFarland explained that acquirers have the infrastructure and well-developed operational processes and procedures to identify transactions that have exceptions.

“If you are a business working directly through one of the network APIs, there is no processor in that flow to manage exceptions, identify them, remediate them, handle dispute resolution and generally see that process through.”

Tech enablers like Ingo have stepped into that role, acting as the intermediary that works on behalf of the originator and receiver to deliver a great experience as close to 100 percent of the time as possible, she said. That includes taking on the operational roles to support dispute resolution, routing, network management and the operations of the network.

Ubiquity Requires Choice

The disbursements network takes on an even greater importance as payors see consumer choice as an essential part of the payout experience.

There is no such thing as a one-size-fits-all solution anywhere in payments, Ingo Money CEO Drew Edwards noted, and push payments are no different. Now, businesses — to their credit — are starting to understand that. It wasn’t that long ago that Ingo was in the business of selling choice to those considering instant disbursements, but that isn’t the case now. More recently, conversations have shifted to how many choices payors need to offer their receivers.

The answer depends on what options are most relevant to the consumer or the small- to medium-sized business (SMB) being paid, Edwards said. Different use cases in different verticals with different client bases will have different needs.

Offering what Edwards referred to as “the basic three” — push to bank account, push to debit and push to PayPal/Venmo — is a good starting point that will likely enable a firm to pay out instantly or near instantly to 97 percent or 98 percent of consumers or SMBs. However, as more choices are made available in the marketplace, the basic three will expand through competitive pressures.

But 98 percent isn’t 100 percent, which is where payors actually have to be to solve for that last mile, he said. And there’s no getting there without offering the full range of choices — from the basic three to prepaid cards, mobile wallets, crypto wallets and beyond.

“If it’s relevant to that recipient, whether it’s a consumer or a small business, then [payors] should offer them that relevant payment type,” Edwards said. “And if you do that, then there’s never a scenario where the recipient says, ‘Well you don’t have what I want,’ or ‘You don’t have a way that I can get those funds easily,’ and walks away. And this is what defines ubiquity to me.”

Maintaining the Racecar

In many ways, Edwards and McFarland agreed, thinking of push payments and firms’ rush to add them into the mix is a bit like buying a racecar and what the buyer wants to do with it. Anyone with enough money can buy one, but buying one doesn’t always mean knowing how to drive or maintain one. That’s the challenge that many enterprise payors find when turning on instant payouts that they also want to scale.

“The enterprise needs processing efficiency, failover, redundancy and choice for the receiver,” McFarland said. “When you deliver all those things, then you can get to a place where you have one consistent business process for paying people. You can deliver on commitments you’re making to those recipients. You can meet your regulatory requirements if you have them associated with payment timing.”

Absent that comes a lot of headaches because neither the enterprise nor the push payments network can step in to solve the problems that inevitably happen when instant payouts are enabled, she said.

Edwards and McFarland agreed that the demand on the part of enterprise payors to adopt instant payouts at scale and with choice has fast tracked the pace at which the disbursements space is evolving. It has also fast tracked the need for payments payout infrastructure to mature in much the same way that the merchant acquiring ecosystem has matured to enable new and better digital payments experiences at scale for merchants and consumers.

A necessary step, both said, is to align payor and receiver expectations for choice, while outsourcing the process, payments and operational complexity to a partner with the marketplace scale to take on that role.

“When you give a full set of choices to a recipient, it’s amazing how many choose a digital and faster option while the check fades away,” Edwards said of his observations of payments choice across the large enterprise payouts he and his team have observed.

He said those customer experiences are driving stickiness now across an accelerating number of use cases and verticals in the market.

“What a great experience it is to watch that unfold,” he said.

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