Instant payouts were on the rise in 2021, with nearly three times as many consumers receiving an instant payout last year compared to 2020, while 17% of consumers received at least one instant payout. Instant disbursements could overtake automated clearing house (ACH) payments as the most popular disbursement method in the United States this year, in fact, as 37% of consumers were familiar with instant payments in 2021 compared to nearly 25% in 2020, according to PYMNTS research.
Demand is growing as individuals realize the benefits of instant payments, but not just for consumers. From small businesses doing business-to-business (B2B) transactions to payroll services issuing paychecks, many industries see a growing need for payment options that make payouts faster, safer and easier. Even insurance organizations are exploring options as varied as Zelle, PayPal, Venmo and push-to-card methods to settle claims, reduce costs and ensure policyholders receive money in a timely manner.
This month’s Deep Dive research examines how the changing perception of digital disbursements is reshaping demand for how transactions are conducted, as well as the challenges companies face in providing disbursement choice.
The need for faster payment options in the B2B market
The pandemic has hit the 31.7 million small businesses that Craft up to 99.9% of all US businesses hard and slow payouts didn’t help. Among small business owners, 59% have experimented late payments from larger customers, businesses, public sector and non-profit organizations, and 25% received payments 20-30 days late. Forty-seven percent of owners have seen an increase in issues with large business late payments throughout the pandemic, and 78% of small businesses have experienced a drop in revenue in 2020 and 46% have had to reduce their workforce.
Not all of these cash flow issues were directly related to the pandemic, however, with 44% of small businesses saying late payments from other entities were negatively affecting their business. The effect trickled down to employees, with 40% of small businesses delaying hiring or planning to do so due to late payments, while 39% delayed inventory purchases and 36% cut hours for employees. employees for the same reason. Conversely, 64% of small businesses said faster payments would allow them to invest in their business, and 58% said they would be able to repay loans or pay down lines of credit faster. .
When it comes to employee payments, workers between the ages of 18 and 44 don’t just want to get their paychecks fast; they want them immediately, with 83% saying they should have access to their earned wages at the end of each workday or shift rather than waiting for payday. Beyond end-of-shift disbursements, 80% of employees would prefer to see funds automatically disbursed to their bank accounts as they are earned. On-demand pay could improve loyalty by 78%, and 79% said they would feel more valued as employees if paid this way. In terms of competition for talent, 81% would be more likely to choose an employer based on the availability of on-demand compensation provided at no cost to the employee. companies have done strides payroll modernization, and 61% of payroll systems were cloud-based in 2021.
Instant payment interest is not limit Neither do traditional employees, and gig workers – often driven by a lack of savings and a need for available funds – also want to be paid faster, with 45% saying they would like to be paid daily or on demand. Another 45% of gig workers would like to be paid at least once a week. This growing demand has been accompanied by innovations in the way workers are paid, from the use of Visa Direct and Mastercard Send by payroll services to the increase in the number of providers offering access to earned wages, which which allows workers to access wages they have earned but not yet received. .
Relieve human resources
Digital solutions to offer workers the opportunity to be more effective and efficient in many different processes, and digital disbursements are no exception. In addition to the efficiencies that can be achieved through modernizing payroll practices, businesses can also benefit from digital disbursements with respect to off-cycle payments, such as reimbursement for travel or home office expenses. to employees, as well as when processing payments to workers and suppliers. that are not part of normal payroll operations. A process that involves issuing thousands of paper checks can be made more manageable with digital disbursements, allowing for reduced oversight and man-hours.
Faster, modernized payment practices can free up HR and finance teams to focus on other priorities while helping to ensure employee and customer satisfaction. HR departments can spend more time on initiatives to engage and support employees, finance professionals can spend their time identifying potential ways to improve their company’s finances rather than making payments, and beneficiaries at all levels can receive money in the way that suits them best. and without delays or taking overtime from employees.