Receiving money right away – instead of in days – is the new expectation, and real-time disbursements make it possible. From insurance claims and deposit refunds, to earnings and loyalty cash-back payments, real-time disbursements provide an efficient, digital solution for sending money quickly and securely.
Visa Direct is a real-time payments network that enables funds delivery directly to financial accounts using card credentials. We talked with Mike West, vice president of North America Push Payments for Visa, about the influence of real-time money movement on how businesses and other organizations send money to consumers.
What's the business opportunity for faster payments?
Faster payments mean more immediate access to money, which is good for everyone. According to a report by Visa, there is increasing global demand for instant access to funds. That creates an opportunity for companies to drive innovation with new faster payment solutions for improving the customer experience, reducing operational costs and for providing a frictionless digital experience that meets fast-changing consumer preferences. Immediate access to money can make all the difference in someone's life.
The total volume of disbursements, or payouts, being made are on the rise and estimated by Visa and Accenture to be $12.5 trillion annually in North America. Seventy-four percent of North American households received some type of funds disbursement in 2017, with a significant portion of funds still disbursed through traditional payment methods like ACH transfers and checks. Over half of disbursements in 2017 took two to 14 days for recipients to receive their funds, often times leaving people in need of interim funds to cover their bills while waiting to receive their money.
While technology is the main enabler, profound changes in the economy and environment have contributed to the tipping point in faster payments.
Disbursements are made for a variety of reasons. Businesses make payments to people participating in the booming gig economy and employers distribute bonuses and expense reimbursements to employees. Insurers and medical companies pay claims, government agencies issue tax refunds, and merchants issue product rebates and loyalty incentives.
With more disbursements being made, faster access to funds is more important than ever.
What momentum do you see in the marketplace for real-time payments? What's been the tipping point?
Technology has altered the role the payments industry plays in facilitating transactions and there's a drive to remove friction, add value and increase security. While technology is the main enabler, profound changes in the economy and environment have contributed to the tipping point in faster payments.
The ways in which people are making money are changing, with gig economy jobs becoming more prevalent. With on-demand services growing at a rapid pace, new e-commerce platforms connect and employ sellers, hosts, drivers, freelancers, developers, designers and small businesses. Those platforms may need to offer faster access to funds, with greater convenience and security, to compete effectively.
Many insurance companies are also looking for faster ways to disburse emergency funds and send claims payments to their customers affected by natural disasters such as floods, wildfires and hurricanes.
According to a recent study from CareerBuilder, 78 percent of U.S. full-time workers live paycheck to paycheck. Many households have limited savings, which means an unexpected utility bill, healthcare cost, school expense or a family emergency can negatively affect their lives. To make up the difference, people sometimes turn to high-rate loans or payday lending, incurring substantial fees and charges.
Consumer expectations have changed. If we can get a rideshare or grocery delivery in minutes, workers will start to want that same fast access to their earnings. Faster payments are poised to deliver real social and financial benefits to people's lives.
How do card-based payments solutions like Visa Direct influence financial health for consumers and businesses?
Companies, including those from the gig economy, insurance, person-to-person payment, small business invoicing and merchant processor segments, have decided to use Visa Direct, which reverses the traditional card payment flow from pull to push. Earnings can be deposited into banking accounts using the real-time nature and simplicity of the debit card.
The biggest benefits of card-based payments solutions are convenience and speed. Card networks have individual and real-time authorization and process transactions 24/7, including weeknights, weekends, and holidays. It's convenient because most consumers and small businesses have a debit card handy in their wallet.
1. Offer customers a card option. Card-based solutions can help companies to create seamless payment experiences for customer disbursements. Platforms like Visa Direct bring scale and reliability to e-commerce experiences, risk management and payment processing. With Visa Direct, the traditional card payment flow is reversed, transitioning from a pull to a push.
2. Understand the use case you are solving for and then develop a minimum viable product (MVP) to quickly get to market.
3. Provide sellers in the gig economy, marketplaces and small businesses with the ability to integrate APIs into your online or mobile experience to collect card data in-flow.
4. Develop simple payment experiences for check replacement use cases, such as insurance, healthcare, expense reimbursements. For example, provide customer notifications that link to a company branded portal to capture digital disbursement preferences.
5. Be thoughtful in your infrastructure investments, and leverage partnerships to stay lean and agile. For example, digital disbursement solutions from Fiserv are already connected to the Visa Direct platform and other card networks, providing simplicity, speed, security, scale and faster market implementation.
The ability to get faster access to earned wages to improve cash flow can be a differentiator. Ride-sharing platforms can use drivers' debit card numbers to deposit funds to accounts in real time, improving driver engagement, loyalty and retention. The majority of Lyft drivers choose to receive earnings using their debit card rather than waiting days for a standard bank transfer.
In addition, insurance companies can send claims payments in real time. Faster payments are critical to making repairs to homes and vehicles. It can also save costs and efficiencies lost on printing, mailing, potential error handling and reissuance of checks.
A small business or seller might be using a service to collect card payments. Cash flow is the lifeblood for any small business to buy supplies, pay bills or make employee payroll. Using Visa Direct, a small business can have real-time access to funds without having to wait two to three business days for normal bank transfers.
Use cases are for illustrative purposes only. Program providers are responsible for their programs and compliance with any applicable laws and regulations.
Actual fund availability depends on receiving financial institution and region. Visa requires fast-funds enabled issuers to make funds available to their recipient cardholders within a maximum of 30 minutes of approving the transaction. Please refer to your Visa representative for more information.