Think of it as the last mile. Not trucking, packages or logistics. Not a white-glove service that gets furniture assembled in the bedroom or living room. This is the last mile of payments, where a push can get funds where they need to go — literally. This is without friction or delays, and where consumers, borrowers and businesses receive funding 24/7, in the ways they want and on demand.
Much has been made in this space about push payments, which assures instant and “safe to spend” funds (meaning the payment cannot be reversed onced pushed) delivered to a consumer’s account. Those payments work over the same payments infrastructure and rails that deliver a debit transaction, but in reverse.
In an interview with Karen Webster, Ingo Money CEO Drew Edwards and Visa’s SVP, head of U.S. push payments Cecilia Frew, noted that push payments are gaining what might be considered critical mass, having been deployed by firms such as Lyft and OnDeck. The pair collaborated on the first push payment seen in the United States five years ago.
The “push” to embrace push payments has come amid demographic shifts, said Edwards and Frew. Millennials are helping to shape expectations of transactions — and what they want is now. No longer do pipes without speed suffice, and no longer are checks enough, for the population in general.
According to PYMNTS’ own research, 82 percent of customers make use of direct deposit, while 96 percent of consumers say they are dissatisfied with checks. The instant gratification comes with a benefit to the companies that cater to the desire, as it can cost as much as $10 to issue a paper check.
The greenfield opportunity for Ingo and Visa (and others) is considerable, as $30 trillion in disbursements are set to go digital. The fact remains that all disbursements by businesses are still done, largely, through legacy means, as 80 percent of firms still send checks or use first-generation ACH — and don’t confuse Same-Day ACH with instant, as it is fast, indeed, but not that fast.
Edwards and Frew noted that it has taken time for the push payments groundswell to develop and get the right attention from the right segments.
Frew said, “The movement has been one from a transaction that was in the rest of the world, but not in the U.S. — and didn’t really work in the U.S. And there was no volume … until the U.S. [developed] 95 percent fast funds coverage.”
This means, she elaborated, that issuing banks will receive and post transactions immediately, making them available to consumers right away. Use cases, she said, have expanded beyond P2P and have grown to encompass disbursements, as noted above. For the Ingo and Visa Direct relationship, bill pay is on the horizon (allowing for bill payments in real time), and the firms are eyeing cross-border payments as well.
Writ large, said Edwards, “the beauty of the groundswell is that it starts with the consumer … This whole thing has been fueled by the P2P movement such as Zelle, Venmo, SquareCash and PayPal… you can pay your buddy across the table instantly, even if the money wasn’t really there instantly.” Then came Uber and Lyft, where making payments at the time of service (and getting paid) instantly took root in the payments firmament.
One sea change, as noted by Edwards, has come within lending, where firms like OnDeck and Kabbage have adopted and adapted to instant funds availability.
In lending, it’s all about “putting money to work for your business instantly upon approval,” said Edwards, and the card rails are the only ones making that work right now. Push payments make lending a 24/7 business with reliable funds showing up in any account instantly.
Thus, the concept of the last mile over those very rails, where — as Edwards and Frew stated — the conversation is changing for the businesses that use those rails. Frew said that disbursements take place across normal and recurring use cases (think bills), and “one-offs,” which can occur when, say, an insurance company pays out a claim or a retailer wants to issue a rebate.
“That last mile, when it comes to on-demand, is ‘my choice,’” she said, and it moves beyond the vagaries of ACH, where holidays can mean … no payments. “I can wait for it or I can [get it] ‘right now’ because I need the money right now, with access to it. That is pretty powerful and the power is in the hands of the receiver. That last mile is really about speeding it up.”
Edwards told Webster the experience can be likened to returning a toaster at Walmart. Receiving a push payment from an insurer or lender, he said, should be the same experience: “as easy as saying ‘just put it on my card’” In that way, the last mile makes it ultimately familiar, fast, convenient, and confident.
Against that backdrop, Ingo and Visa seek to close the gap, enabled by technology, with emails, texts and digital wallets that can help make the last mile frictionless.
“Every consumer already has everything they need to receive a push payment in their wallet today,” said Edwards. Frew added, “The conversation no longer is about helping companies understand why it is valuable. It’s about how to get them up and running on the service quickly and easily.”
To get up and running, and harness the speed and ease of push payments, companies need pipes. And with pipes comes the build-or-buy argument — in other words, build the infrastructure or buy it? Or how about: partner?
Visa Direct’s Silicon Valley vantage point, said Frew, shows that the way people innovate quickly and successfully is to partner with other firms, to get up fast and run with the objective of learning what works and what doesn’t.
“Companies can spend months building out connections and then they lift up their heads [and] they say, OK, where is the volume?’” said Frew. She added “the volume will not be there because those companies [busy building out infrastructure] haven’t spent any time on the front end.”
The variables are many in a buildout. Edwards explained that a firm would need to build authentication, and velocity tools across multiple endpoints. In many use cases they would need to build an SMS- or email-based notification system to engage the recipents and then manage a secure paywall collect and store payment information. Oh, and if you want to offer ubiquity and consumer choices reliably, there’s the coding needed to work across 20 plus different endpoint integrations and you need to secure bank sponsorships and solve for regulatory issues such as money transmission. Moving toward a standardized, end-to-end solution may be of use for most firms in most cases, and Edwards and Frew explained, “push payments in a box” exist across Ingo’s API-focused, fast-platform service.
In that case, the client company controls the user experience but everything is provided by the software and service provider — from intelligent payment routing to compliance, across a reach that spans 4.5 billion consumer accounts, and where billions has already been disbursed through Ingo’s partnerships with Visa, Mastercard, American Express, PayPal and others.
“We are literally agnostic,” he said of Ingo, when it comes to payments.
As choice and convenience gain scale, said Frew, “we are in the middle of a transformation. We’ll look back in five years and say, ‘remember when payments were slow?’”
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