2019: The Year Of Instant Payments

Here’s a 2019 prediction that we guarantee will come true: There will be no human being or business adamantly hoping to be paid slower in 2019 than they were in 2018.

We also guarantee that this prediction will hold, regardless of who one is talking about or the use case to which it pertains. That could be the small merchant wanting access to their daily sales on the same day instead of seven days later, the dad who just sent $100 to his college-age kid to buy food for the weekend, an Uber driver waiting to get paid for their daily fares or the homeowner who just had a tree fall on their roof, and would like to arrange and pay a roofer to fix it.

The need is widespread, Ingo Money CEO Drew Edwards told Karen Webster in a recent conversation, and the call for faster and instant disbursements has come in loudly from enough corners to dub 2018 as the “Great Awakening” of push payments.

Progress Points

When PYMNTS and Visa spoke to 2,800 consumers for the 2018 edition of the How We Will Pay study, working consumers were among the groups keenest to be paid faster. Nearly 70 percent of those surveyed expressed a desire for shorter pay cycles, with 45 percent saying they were interested in being paid every week and 24 percent expressing interest in being paid on demand, or as their money is earned.

Better cash flow management and bill payments led the field for reasons why workers wanted to be paid faster, with 53 percent of consumers naming one of those two as their primary reason. Faster payments are particularly important among the up-and-coming Bridge Millennial demographic as well, with 32 percent expressing a strong interest in faster access to their pay.

Among gig workers, the enthusiasm is even stronger, according to the PYMNTS Gig Economy Index, which indicated that 84 percent of gig workers would work more if they were paid faster.

The enthusiasm for faster and instant payments in the freelance segment has meant that the gig economy has given instant payments a big push in 2018. The year saw Postmates and Visa roll out a solution that allows Postmates workers to instantly receive their earnings in their bank accounts via Visa or Mastercard debit cards for a small fee, instead of waiting four to seven days for their scheduled payouts to be delivered via ACH.

ADP announced a new integration with DailyPay, one which allows ADP merchant customers nationwide to offer the daily pay benefit to their workforce via the ADP Marketplace. In addition, Uber and Lyft both rolled out — and updated — their instant pay for drivers features in 2018.

However, instant payments progress in the world of work wasn’t limited to the gig economy. Getting paid for work before payday began making notable strides into the regular nine-to-five economy.

The nation’s largest retailer by sales and largest employer, Walmart, announced a year ago in December that it was partnering with Even to offer instant payments for its employees. Using Even’s financial planning tools, Walmart employees were offered eight instapays each year for free of charge, plus an additional eight for a marginal fee. Those instapays allow for a portion (up to 50 percent) of wages that workers have already earned during the two-week pay cycle to be paid out to them instantly.

Six months in, more than 200,000 workers had signed on with the program.

“That is actually incredible, particularly when you see it compared against other benefit participation for things like 401(k), which comes in at about 3 percent,” Even CEO Jon Schlossberg told Karen Webster in a conversation about the roll out. “This is a product that helps employees with the problem they have. When people are living paycheck to paycheck, you don’t have room for error, and what we have seen is people really want to make good decisions.”

While instant disbursements probably made their largest gains in the world of work, and getting workers paid faster, there was at least one other notable highlight.

In September of this year, PayPal announced the launch of Funds Now, a program built to give merchants instant access to funds generated by card sales at their establishment. Those funds are deposited into the merchant’s PayPal account, in real time, for that business to transfer to their bank account or use within their PayPal account to buy goods and services.

“Holds and reserves are a blunt instrument that the payments industry has used for decades to guard against fraud and risks,” PayPal COO Bill Ready told Karen Webster at the launch of Funds Now.

The “magic” of Funds Now, he said, is the information and systems PayPal has to evaluate hundreds of thousands of variables, in real time, and make decisions accordingly about merchant access to funds.

“We know what a good risk is and what a seller in good standing looks like,” he said.

The Funds Now aspiration isn’t just to change how merchants get paid, however. According to Ready, PayPal wants to change expectations that merchants have about getting access to their money. Instead of waiting uncertain times for uncertain amounts, PayPal is giving small merchants access to their funds in real time, then letting the merchants decide how they want to direct those funds — either within the PayPal ecosystem or outside of it.

Where Work Is Still Needed

While interest in instant payments by — what Edwards calls the “smokestack economy”— is growing, and “RFPs are flying out every day,” the progress hasn’t been quite as quick.

Edwards noted a conversation with Visa’s Celia Frew earlier this year — for good reason. Taking the insurance industry as an example, older firms flipping the switch on things like digital disbursements isn’t always simple.

“Insurance is a highly complex, established smokestack industry, and it’s not easy to just inject itself into the digital economy alongside players like Lyft and Airbnb that were designed for the new economy,” Edwards said. “Insurance is sitting in a totally different place, and it’s complicated for them to engage digitally with all the parties they connect to.”

The universal standard, and the one to which he and Frew agreed the industry will build over the next several years, will be one where consumers with problems will be able to digitally access their insurers, and handle all their needs up to and including instant payments disbursement.

“But it’s going to take some building,” Edwards added, saying that the same was going to be true for a large part of the smokestack economy.

The interest is there, he noted, and growing. The devil will be in the details of building the integrations and optimizations, so that instant payment offers are made in the right “flavor” to the right user groups.

“It’s not always going to be fast,” Edward said, “but I think you are going to see it moving undeniably forward in the next year [or] two.”