Knowing When Payments Are Instant – And When They’re Not

With all of the problems and challenges 2020 has thrown at us, the last thing anyone needs is a nagging perceptual rift between payees and payers about what “instant” means. Yet, there it is.

“The majority of consumers, at 58.4 percent, and microbusinesses, at 70.8 percent, state that most of their non-government payments come through non-instant methods and take more than a day to receive. Payers claim, however, that they make only 45.3 percent of their disbursements using non-instant methods and use faster methods for the remainder,” according to PYMNTS’ November 2020 Disbursements Satisfaction Playbook, an Ingo Money collaboration.

In this special “Who Pays, Who Collects and What Payment Methods Are Used” edition, PYMNTS researchers get to the heart of the matter, noting that “this perception gap is likely due to the fact that receivers cannot always distinguish between the payment methods used to disburse funds into their bank accounts. Receivers, moreover, most likely do not monitor their accounts constantly and therefore have no way of knowing with certainty how fast the payments reach their accounts. This suggests that increasing receivers’ awareness regarding payment methods’ speed can help receivers access their funds more quickly.”

Increasing receivers’ awareness is just one of several strategies discussed in-depth in the November Disbursements Satisfaction Playbook, as jobs like awareness and such fall to established leaders and rival upstarts in the massive disbursements in the space.

Awareness Drives Usage

As to awareness, the consumers most likely to know, use and even insist on instant payments are the digital-native Gen Zs, as digital is always their first choice and they know the terrain.

“Gen Z consumers are the most likely of all age demographics to have received an instant disbursement, with nearly 17 percent of non-government payment recipients in this group, having received at least one in the last year,” per the Playbook.

Millennials come in second at 15.6 percent. A paltry 8 percent of baby boomers and seniors report receiving an instant payment, while the new survey found that “12.7 percent of Gen Z and 9.4 percent of millennials received an instant income and earnings-related payment, and 11.8 percent and 10 percent, respectively, received an insurance and lending payment instantly. These younger consumers are also more likely than other age groups to bank with financial institutions and insurance service providers that make instant payments available.”

Concerning the types of payments most likely to be sent and received via instant means, PYMNTS found that “the most common source of non-governmental disbursement consists of payments related to income and earnings, such as those for freelance or consulting work or for goods or services sold online.”

Over 64 percent of disbursements received by microbusinesses and nearly 29 percent of those to consumers fall into this category, per the Playbook. This is followed by payments related to product purchases, such as manufacturer or product rebates or warranty payments.

Stubbornly Old-School

Instant payments gained immense traction through the health crisis, and expanding access to faster rails is a cash-flow cure that small businesses desperately want in the pandemic economy.

Be that as it may, the research finds a lot of room for improvement in the velocity of funds.

“[The] majority of payments are received via old-school methods, including three- to five-day ACH, checks and cash. An average of 50.1 percent of consumers’ disbursements and 49.9 percent of microbusinesses’ [disbursements] are received through legacy methods,” per the new Disbursements Satisfaction Playbook.

Drilling down, the Playbook notes that “certain use cases tend to rely more heavily on legacy methods than others: 58.8 percent of consumers’ and 45 percent of microbusinesses’ insurance and loan disbursements were made in this way. Disbursements related to product purchases were more commonly received using digital methods, with legacy methods accounting for only 42.6 percent of consumers’ and 43 percent of microbusinesses’ payments in this category.”