In Lending, Next-Day Payout Doesn’t Cut It

Online and alternative lending is satiating consumers’ need for speed when it comes to accessing finance. But, while an online loan decision may be near-instant, borrowers may still have to wait several days to actually see the money — and what’s the good in news like that?

In the third episode of our “Kill The Check” series, Ingo Money’s CEO Drew Edwards spoke with PYMNTS about the demand lenders face not only to fast-track approvals, but also to push payments into the accounts of borrowers — regardless of account type.

“So, many of these lenders have been wrestling with this problem for a long time,” said Edwards. “The number one complaint they get after a loan is approved is, ‘Why do I have to wait on my money?’”

That speed factor is why some online lenders may lose market share to competition. If a borrower’s car breaks down and he needs the vehicle to get to work, an online loan that takes a week for funds to transfer to his account won’t be much help. Instead, Edwards said, those borrowers are going to go to someone who can provide cash immediately.

The emergence of push payments and instant funding perfectly addresses this need for lenders. Push payments use the same mechanism as pull payments — only in reverse, moving funds from a business to a consumer. They deploy existing rails to do this, instantly transferring funds to credit and debit cards or a PayPal account. 

Edwards said shifts in the marketplace are forcing many businesses to tap into the push payment technique for many different use cases. But for him, lending — and getting cash to borrowers more quickly — is a favorite application.

“It’s a no-brainer,” said Edwards. “Online lending marketplaces have completely changed the lending industry, but having instant loan decisions for consumers is actually only halfway there. Customers rebel when they can go online and apply for a loan instantly, but then it takes a week or several days to receive their money.”

According to Edwards, Ingo Money is seeing an influx of companies asking for a solution that supports online payments for customer payouts, whether it be online lenders looking for an integrated white label solution on their portals or a simple plugin. The largest financial institutions, he said, can build propriety solutions in-house to integrate push payments — but these emerging FinTechs in alternative and marketplace lending spheres should have a partner to ensure solutions are Payment Card Industry (PCI) compliant and have proper risk management capabilities in place.

For Ingo Money, API technology has been critical to making it easy for lenders and other companies to deploy push payment capabilities.

“We deliver everything they need to move money directly into a consumer’s account — from processing, risk management, compliance, settlement, reconciliation and more — behind a simple API and SaaS platform,” said Edwards.

Push payments that enable accelerated access to funds aren’t limited to consumer lending, either. Edwards said there is significant and natural opportunity for businesses like factoring companies — with a client base of small- and medium-sized enterprises (SMEs) — that need funds while they wait for unpaid invoices or for providers of revolving lines of credit.

Whether for car repair or to buy business inventory, online payments then are a natural fit for lenders and loan proceeds. The speed and flexibility of instant funding can help these lenders realize the full promise of a modern lending experience for their customers.