It’s a paradox, to say the least.
Consumer demand for instant payments is higher than ever.
At first glance, it’s the use cases where consumers need cash right now that prove most popular for instant payments — think FEMA money, for example, Ingo Money CEO Drew Edwards told Karen Webster of PYMNTS.
As Edwards pointed out to Webster, the main use case that could motivate the adoption of more digital payments might lie in online gaming and sports betting.
Across the board, there is a desire for payments to be made digitally and in real time. Nearly half of US consumers who receive payments would choose to receive them via instant payment channels if they could.
But here’s the irony: dispatchers are starting to take the immediate option away, at least in some cases.
As measured by PYMNTS and Ingo, 22% of consumers received at least one non-government payment between July 2021 and July 2022. Up to 17% of payments were made via instant payment channels.
While the above examples provide evidence of progress, Edwards noted that the lack of faster progress boils down to one keyword: availability.
“I would blame the lack of availability of legacy processes in large organizations built around scans and ACH, as well as on system and technical resources,” Edwards said. But there is also an uphill battle to fight against payment methods that have taken root for decades. Writing checks is universally accepted and ACH payments are generally recurring transactions, with credentials already on file.
“The presentation of options, and the immediate options within that choice, is a different kind of interaction between the motive and the drive,” Edwards said. Peer-to-peer (P2P) has been able to work it out across applications, but there are layers of complexity when adding businesses to the mix.
However, it is difficult to understand how instant payments can reach critical mass when they are held back a bit.
Digging a little deeper into the numbers, it turns out that consumers are 3.5% less likely to be given how they receive payments in 2022 than they were in 2021. Consumers were allowed to choose how they received them for only 68% of the payments they received this year. This means that the options are removed – they are not added.
“If you were one of those companies that decided to build and sew these rods together on your own, you might realize that maintaining them is costly and backing out some options,” he said.
In fact, cost is the factor that pushes at least some players to reduce optional payouts. By doing this and in filtering out the down payment options, Edwards said the ubiquity ends up being discounted, too (which hurts, well, everyone, in the end).
At this point, a check alone can claim to be ubiquitous in B2C and B2B transactions — as Edwards noted, pretty much anyone can send or receive a check. But for the company that spends $5 to withdraw the $1.58 check, print it and mail it – well, the PayPal form becomes very cost-effective. Consumer experience with P2P opens the door to a level of convenience with instant payments, and eventually these faster offers will become mandatory.
Some pockets of growth
Measured pace may be the trend in the industry, but as Edwards notes, there are a number of providers and platforms (such as Ingo) that are seeing merchants actively seeking to add a payment option.
Other sectors making the switch to digital payments – and thus eventually instant payments, if they don’t exist yet – include the legal system, which has traditionally been awash with paper checks. Healthcare is ready for digitization and instant payments, as is insurance.
“But insurance, in particular, has a lot of ground to cover, because I’m not aware of a large insurance company that is completely digitalizing all of their payments. They are going to use the use case to build bridges between old technology and modern payments,” Edwards said.
For insurance companies that are able to offer at least some immediate payments, consumers choose this option 75% of the time. At a high level, in the transition to instant payments, progress is being made – not as fast as some might prefer, and not everywhere in one go, obviously.
Commenting on the payments themselves — and where the moments are gaining traction — Edwards noted that traditionally, consumers tend to choose cash payments at higher rates than game operators, due to the relative anonymity of those payments. But, Edwards said, Ingo is finding demand within the gaming space, where paying the discount is gaining special attention from consumers.
He said of instant payments, “It’s an expectation, as we see a lot of people fluctuate [gaming] From provider to provider to provider, where there are any number of incentives and games.” The speed of money paid becomes part of the attraction.
Although the stats show a relatively low penetration of instant payments, Edwards said there is cause for optimism.
“If you really step back and realize that all of this started just a few years ago — four or five years — and the awareness and adoption that we’re seeing — that’s actually quite extraordinary,” said Edwards, who added that “there is a very fast cycle of adoption and transformation that is happening.” “.
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