The Surprising Industries Speeding Instant Payments Adoption

The global value of real-time compensation is projected to reach $34.3 billion over the next five years, according to the July Disbursements Tracker.

The rising demand for real-time disbursements isn’t just the purview of B2B transactions, cross-border payments or the gig economy — it’s also coming from industries like retail, restaurants, entertainment and even insurance.

The growth in online shopping means more shoppers need refunds on returned merchandise. Nearly 30 percent of online purchases are returned — a rate that’s three times less for physical purchases. And because of Amazon’s automated returns process, customer expectations around speed and convenience have also been growing.

Most companies (93 percent) aren’t keeping up with consumer demand for instant B2C payments, according to the new Disbursements Tracker.

The music industry doesn’t immediately come to mind as a driver of real-time payment adoption, but royalties are an emerging use case for digital disbursement. Music rights administrator Revelator has created Artist Wallet, a mobile copyright app that splits and distributes royalty payments to recipients. Users are automatically notified when their songs are played, and the app allows them to instantly cash out their royalties.

According to the Bureau of Labor Statistics, there are approximately 2.6 million individuals employed as waitstaff in the restaurant industry — and these workers are accustomed to receiving tips at the end of a shift.

However, as customers’ payment preferences shift to paying with credit or debit cards, cash has been falling out of favor, creating issues for restaurant workers and managers.

According to PYMNTS’ How We Will Pay report, almost half of the consumers studied carried between $10 and $50 in cash in their wallets, largely reserved for tipping (39 percent).

Cash management solutions could alleviate these payout problems by batching cash transactions and instantly disbursing employee tips to their bank accounts or prepaid cards. Startups like mobile tipping app BRAVO and Gratuu have been developed to fill this void.

In an interview with PYMNTS, Drew Edwards, CEO of Ingo Money, explained that one of the issues with facilitating digital tips is that batch-based processors are layered together with other systems, creating a lack of end-to-end visibility across the entire payments flow.

“Until that restaurant or merchant hits a button at the end of the night to batch out their daily sales, that day’s transactions are invisible. The [legacy players] can’t see the transactions, and so they can’t give over the funds because they don’t know what the merchant has done that day,” he said.

While banking might be the obvious choice for an industry that is capable of driving adoption of instant push payments, Edwards predicted it would be the insurance industry. “Payouts is their business. That whole notion of paying out is so core to the industry; they are all moving lightning-fast,” he noted.

To that end, companies like gig insurance provider Verifly have emerged to fill this “micro policy” insurance niche designed for freelancers and gig workers. The mobile-based company offers an app for users to pick policies that cover liabilities for short-term assignments as well as projects that can last up to a year.

Jay Bregman, CEO and co-founder of Verifly, explained why insurance companies geared toward larger businesses — those that provide annual insurance policies and slow settlements and claim disbursements — don’t work for the gig economy.

“The solution for the impending rush of the gig economy is in the product … the insurance product and the technology product need to be fundamentally modified,” Bregman said.

For Verifly, this means integrating various payment types onto its platform like Apple Pay and other digital wallets.

Payment solution provider VPay also recently launched a claim payment service that is bringing faster disbursements to the insurance industry. The web-based, mobile-friendly tool allows consumers to review claims, approve transfers and receive funds — via check, automated clearing house (ACH) or push payment — on any device.

It’s not just startups and FinTechs creating products to capture market share in the gig economy. Big players like American Express have also been offering solutions. Last year, the company launched American Express Go, a digital service designed to help mid-sized and large companies handle business expenses for temporary workers and employees without corporate cards to remove the need for a reimbursement process.