The Point

A Better Way to Pay Consumers: Making the Move to Digital Disbursements

Oct  05 
Tammi Shapiro and Paul Diegelman  VP, Product Management and VP, Business Development, Electronic Payments, Fiserv 

Sometimes life simply moves too fast for paper checks and other slower payment options. Businesses that send payments to consumers are well aware of this reality, yet nearly half of all consumer disbursements made each year– insurance claims, rewards, rebates, refunds – are still made by check, according to an Aite Group study.

Paying vast numbers of customers, workers and business partners quickly, securely and efficiently is challenging, and in many cases existing processes have evolved to fit specific needs and requirements. Payments must be accurate, be able to be tracked and reconciled, and be optimized for companies' unique needs. The insurance industry in particular requires the ability to make multiparty payments to people with different accounts. Almost all businesses, from those in traditional industries to members of the gig economy, find it's increasingly necessary to provide convenient, real-time business-to-consumer (B2C) payments.

Advancements in disbursement tools are opening new avenues for companies to get money to their customers, clients, business partners and employees faster and more efficiently. Using digital disbursements, companies can now send digital payments to an email address, mobile number, debit card or direct to an account. While it's easy to see the value of providing faster, digital B2C payments to the customer, companies must also ensure transactions are cost-effective, efficient and secure.

Companies that make B2C payments are at a turning point in adopting new ways to meet customers' evolving payments needs. Fiserv recently asked more than 30 businesses that send B2C payments what was most important as they move from paying consumers with checks to paying digitally. Here are their top four considerations:

1. Speed of Payment

Faster payments, including real-time money movement, are an increasing priority across payment types. Among those who received a check for an insurance claim or rebate in the past year, 54 percent would have preferred an electronic payment, according to Expectations & Experiences: Consumer Payments, the quarterly consumer trends research from Fiserv.

Using digital disbursements, companies can now send digital payments to an email address, mobile number, debit card or direct to an account.

Especially when there's an urgent need, such as sending an insurance claim payment or getting paid for work, people don't want to wait days or weeks for the check in the mail. Companies that deliver the speed, ease and digital experience people increasingly expect, including instant or timely payments, will likely benefit from an increase in customer satisfaction and retention.

2. Cost of Service

The cost to issue a paper check averages $5.91, according to the Association for Financial Professionals.  When multiplied by millions of payments every year, as many companies do, the expense can be substantial. Digital disbursements help reduce costs associated with paper-based payments, including labor, processing, postage, bank fees, error handling, reissuance, customer service, tracking and reconciliation.

While newer businesses often use digital processes from the start, traditional businesses will need to consider the cost of changing systems and processes. Medium- and long-range benefits most certainly will outweigh the upfront investment involved with integrating and rolling out a digital disbursements solution. Flexible integration methods can enable a simple implementation and accelerated time to market.

3. Security

Most companies don't move money as a core part of their business. Partnering with a financial services provider that securely processes billions of transactions and has multilayer PCI compliant capabilities – required if credit card payments are accepted – can help companies manage risk. Those competencies, along with other compliant systems and methodologies, ease the compliance burden for businesses.

Digital disbursements may have unique considerations. For instance, consumers may be hesitant to share their bank account information with a company to obtain a one-time rebate. In that case, businesses can look to other methods of customer identification, such as an email addresses. Finding the right mix of payment options and the right provider is key to providing a secure transaction.

4. Flexibility

Consumers want money movement options that are flexible and accommodate the way they want to manage their payments, including payouts to a bank account, card, social token linked to an account or yes, even a paper check. In the same way, companies need options in order to make payments based on customer preferences and available account information. A flexible payment solution gives companies more control over the payment speed and opens up revenue opportunities for those that want to monetize faster payments.

The Changing Face of Disbursements

Most businesses do a good job of collecting money from consumers quickly and electronically, but many struggle to pay with the same ease and speed. Businesses that adopt newer B2C disbursement capabilities can help satisfy consumers' desire for fast, secure payments and drive customer loyalty.

The gap between traditional payment methods and technological advancements continues to widen. More businesses, particularly businesses growing up in the digital space, are using newer, more efficient disbursement payment methods that offer speed, security and flexibility – options that also resonate with their consumers. However, for many, there's still plenty of catching up to do. The advancement of faster payment rails and advanced technologies may make now the right time for your business to implement digital disbursements.