How Will Instant Payments Affect Businesses?

credit card payment

As evidenced by the EMV liability shift, major changes within the payment processing industry take time. Even simple processes, like money transfers and payments, can take days to fully process. More and more consumer products like Venmo are popping up, providing a way for consumers to instantly transfer money to each other. Still, it’s standard for businesses to wait a few days for their funds to actually clear.

The good news? There are several signs that the industry is moving toward shorter payment times.

A Look at Same-Day ACH Payments

In September of last year, new rules were implemented that made same-day ACH payments possible. These payments are common for everything from payroll to automatic bill pay, like insurance and gym membership payments. For a small processing fee, it’s now possible to settle an ACH payment within two hours.

So, why did the association that’s responsible for these payments decide to make same-day payments a reality? In their assessment of use cases, they found several compelling reasons for both businesses and consumers, including significant demand from both groups. Consumers want these payments to be as straightforward as cash. And for businesses, faster payments mean improved cash flow.

Risk reduction was another notable driver of same-day ACH payments. The infrastructure updates needed to support same-day payments also provided increased fraud prevention and better overall security.

What to Expect from Instant Payments

Thanks to this, as well as the rise of new payment types like Bitcoin, banks are seeing the importance of providing faster payments for consumers when they interact with businesses. As with EMV technology, banks outside of the United States are at the forefront of instant payments. When the United Kingdom introduced a faster payments system, more consumers moved from using checks to other forms of non-cash payments.

Banks across the U.S. are exploring different instant payment options. This means they are weighing both the benefits and challenges of this transition. In terms of benefits, instant payments are a way for banks to win both consumer and business loyalty. The faster cash flow is also a positive thing for all parties. But are a significant number of businesses willing to pay a small fee to get their payments faster? This presents a challenge – banks also need to look at the investments required to enable this technology and see if it will provide a meaningful ROI.

For business owners, any effects of instant payments will be gradual. The good news is over time, the positive effects will be felt by both consumers and businesses. If you want to be sure that you’re in a position to reap any benefits as they come along, the best thing you can do is have a great payment processor on your side.

 

 

Posted on Monday, September 18th, 2017