Microbusinesses care deeply about transaction efficiency. Deposits’ timing and ease of access can be crucial to the fiscal viability of these small businesses, as even short delays in payments or income receipt can be financially devastating in a time of extended economic uncertainty.
When it comes to the disbursements they receive, instant payments offer a seamless flow of funds between vendors and clients, eliminating sometimes lengthy and inconsistent waiting periods before funds clear. Instant payments also limit the possibility of administrative errors common to slower payment methods like paper checks, making it easier for microbusinesses to manage budgets and project future earnings.
For these and other reasons, 81% of payors believe that instant payments are essential for improving supplier relationships, according to the Disbursements Satisfaction Playbook, a PYMNTS and Ingo Money collaboration.
See the study: New Data: Receivers Value Instant Payouts Enough to Pay to Get Them
An Important Tool for Customer Engagement
Instant payments are an important tool for improved customer engagement and transaction management. PYMNTS research indicates that businesses that resist modernizing their disbursement practices may face an excessive risk of alienating their vendors or customers over time.
Only 31% of microbusinesses stated that they were likely to continue a client relationship with a business that did not present instant payments as an option. If they were offered instant payments without a fee, on the other hand, 67% of microbusinesses said they were “somewhat” or “much” more likely to continue that business relationship.
Payors appear to understand this and are willing to provide free instant payment options to clients to improve consumers’ experiences, even at fees of up to $5 per transaction. In fact, 69% of all payors said they were willing to pay a fixed fee of $5 to send instant payments.
Payors and payment recipients measure the cost-to-reward value of instant payments with different criteria, however. Payor enthusiasm for instant disbursements may be driven by the payments’ efficiency and ease of use for clients, with 81% of payors believing that offering instant payments for free will increase the likelihood of a continued business relationship with payees.
Working in a Digital-First World
Payors in the PYMNTS survey represent companies having revenues of at least $1 million to over $100 million and at least 11 employees. More than 56% of these companies made all or most of their payments to microbusinesses. Payors showed the highest tolerance for fee-paid instant payments to businesses in markets with lower switching costs, such as insurance and investment disbursements.
The logic is simple: Instant payments help payors limit costly errors in payment processing that can become prohibitive at scale. Instant payments also help larger payors keep microbusinesses on board as loyal, engaged vendors or clients by limiting friction on every transaction. Instant payments are a key element in payors’ arsenal of business performance tools, eliminating transactional friction and simplifying customer relationship management with microbusiness clients by keeping processing times to a minimum.
Today’s businesses operate in a digital-first world in which contactless payments and innovations like text-to-pay mobile are becoming commonplace. Frictionless transactions have become the new normal for many growing businesses, and this expectation of seamless funds transfers means they will be less tolerant of intractable barriers to rapid funds access.
As PYMNTS research indicates, payors must adopt a robust digital-first strategy to meet the transaction requirements of the modern client. Most businesses, even those not choosing instant payments for every transaction, expect instant payments to be available on demand.
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