Is Consumer Choice as Much a Factor as Speed in Payments Innovation?

Ingo Money CEO Drew Edwards said instant availability and usability of funds is all but expected across the payments space these days, thanks largely to the success of P2P platforms like PayPal ’s Venmo or bank-backed Zelle . Ingo Money, he told Bank Innovation , is an instant money company providing mostly B2B and B2C services, usually through banks and alternative financial services providers, across a variety of use cases like instant deposits. “Pretty much everybody in prepaid and payroll, and even some of the wallet guys, now, we use our functionality to enable the same kind of instant access, if a consumer got a check and is not well served by their financial institution and wants their money right now, anywhere they want it,” he said. The most recent and “exciting” use case, Edwards said, is what the market is calling “fast funds” or “instant payments.” “It's a very confusing space, but at the end of the day, it's focused on business to consumer payments, which today are dominated by checks and ACH, where the banks have a huge point of view and position in that market,” he said. “It's really driven right now by consumer experience and demand that, I think, P2Ps like Venmo and Zelle sort of set up.” He said consumers are now used to paying each other instantly, without writing a check or pulling out cash. He said people are starting to ask why their bank or insurer couldn’t pay them the same way. Asked what “instant” means in payments, Edwards said, “Instant means, ‘I owe you $500. Tell me where you want it.’” He said speed is a big part of it, but it’s also about the options in terms of how a payment can be made and where those funds can go. “Let's say you key in your debit card, or your Zelle credentials, or your PayPal credentials,” Edwards said. “Instant means about three or four seconds later -- assuming we’ve authenticated, and all that happens in that process -- you have that money in your account. It's real, irreversible, spendable money that hits your account and you can go to an ATM and pull it out.” He said Ingo Money believes the disbursement side of the payments market is heading toward choice, “just like on the buy side of the world, where a consumer goes shopping online, gets down to a shopping cart and is asked how they want to pay, and they’re presented with all kinds of evolving options.” He said what drove innovation on the buy side of payments, at the hands of companies like PayPal, Braintree , Stripe and Square , was the move to online commerce. “So, what was easy customer experience, walking up to the cash register at Kroger and swiping my card, the old guys had that down pat,” Edwards said. “When you try to type that card number into the little bitty screen on your phone, that became friction-filled and difficult, and abandonment rates were high.” He said innovation over the last 10-15 years was all wrapped around making it frictionless and easier to buy things on smaller screens, smaller devices online. “Now that's all moving to Alexa and Apple Pay and connected devices,” he said. On the disbursement side, he said, Visa and Mastercard , along with gig economy giants like Uber and Lyft , started building some solutions around push payments but it’s proved not as easy as everyone thought it would be. “Especially in the smokestack economy, again, it’s this move from sending a check to an insurance recipient versus giving them this digital option to just get paid however they want,” Edwards said. “That creates all kinds of new challenges like online commerce created for traditional merchant acquiring.” He said innovation in the space is about creating a frictionless digital experience for those new use cases and that what’s driving innovation is “all these legacy guys trying to replace checks and ACH with instant real-time funds.” Mike Massaro, CEO of global payments firm Flywire , which helps universities, hospitals and businesses accept foreign-currency payments, told Bank Innovation that cross-border payments solely reliant on bank wires created headaches for payers and recipients alike. “It’s a poor experience for the payers, between lack of visibility of the payment and paying too much money,” he said. Sometimes the amount, even when it’s already left the payer’s bank account and been deposited in the receiver's account, couldn't actually be identified as the payer’s due to reconciliation issues, Massaro said. “You're sitting there having made a $50,000 or $60,000 payment, and the money's gone from your account,” he said. “The person you sent it to says they don't have it yet or doesn't know that it's your money. So, that whole experience is really broken.” Additionally, he said most billers don't have 24-7 call centers. “So, you're sending an invoice to China, and you have people calling you from China speaking Mandarin, asking where their payment is at 2:00 in the morning,” he said. “If you're not really set up to handle that, you're giving a really poor experience.” He said Flywire, therefore, built a cost-side solution to help with the posting, reconciliation and identification of the payment, while also handling the customer service related to the payers. Asked what’s driving innovation in the industry, Massaro said there's been “a bit of an Uberfication” of consumer finance. “There's just a lot of consumer-centric applying of technology to quote-unquote improve people's day-to-day," he said. Join us at Bank Innovation Ignite 2019 , March 11-12 at the Hyatt Olive 8 in Seattle. Register here .

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