Tech trends constantly make just about every aspect of our daily lives faster, from speedier Internet access to the ability to make remote bank deposits. The ability for the businesses to process payments faster is no exception. Now, cutting-edge advancements have made real-time payment processing a reality, although the widespread adoption of a faster system is not yet in place for businesses and consumers in the United States.
The demand for faster payment solutions is evident by the large number of people taking advantage of new payment innovation in the U.S. and beyond. New mobile payment systems, digital currency and other streamlined solutions are helping businesses and consumers manage quicker transactions. Emerging mobile payment platforms such as Google Pay and Android Pay reached a whopping $75 billion in 2016, according to BI Intelligence, a leading U.S. research service. That figure is projected to top $503 billion by 2020. As payment processors, it is important to know how quickly the technology landscape is evolving in order to stay current and provide an up-to-date payment solution for your customers.
Faster payments in the U.S. marketplace have been made possible largely thanks to wide-spread adoption of ACH transactions in the form of direct deposits and direct debits. ACH technology makes transfers prompter and electronic transactions immediate. ACH technology and similar innovative systems leverage an online and mobile system for payment processing. ACH deposits and debits can be made with a debit or credit card as well as via payroll transactions.
The ACH Network manages ACH transactions and the flow of money in the U.S. The ACH Network moves more than $43 trillion through 25 billion financial transactions every year, according to the National Automated Clearing House Association. Slowly, more businesses are moving away from cutting paper checks and accepting money orders to streamline payment processing. Most ACH transactions occur within one or two business days and same-day ACH transactions were implemented in September of 2016.
Innovation Is Everywhere
At the consumer level, smartphone apps and Facebook Messenger have grown options to make quicker and more convenient payments. Payment processing methods such as Apple Pay and Venmo rely on a tap-and-pay technology via mobile phones.
These payment platforms give anyone with a mobile device and a credit or debit card the ability to make fast contactless payments. These innovative payment platforms typically take one to two days for a payment to process depending on the user’s financial institution.
Facebook Messenger, for instance, relies on digital wallet technology that has transformed the payment process. Digital wallets are similar to a traditional wallet and use encryption technology to hold debit or credit card information.
The Need for Speed
There are many reasons for the growing demand for faster payments, particularly when it comes to expediting payroll, bill payments and business payments. High volume businesses with a lot of money flowing out seek to decrease payment turnaround time. A key advantage of faster payment processing is fact that paper checks and physical transactions are costly for business operations. Not to mention, ACH technology reduces the amount of manual processing required for scheduling recurring payments.
Some financial experts say less reliance on cash, checks and cards will also result in more fraud protection. Relying on digital transactions can reduce theft and fraud because of the inability to duplicate credit or debit card information.
Many insurance companies want swifter funds so reduce turnaround time for much-needed claim payments. For example, Allianz Global Assistance USA, a large Virginia-based insurance company, recently rolled out innovation for faster claim payments. Their customers can receive payments within one or two days by using the company’s mobile app to file claims and opting for a direct deposit option to receive funds.
Some critics argue faster payments have a downside when it comes to fraud management. They say speedier payments inevitably open the door to risk and fraudulent transactions. Critics are concerned that “instant” payments leave little or no time to intervene with shady transactions.
Similarly, they contend quick payments can lead to poor identity management when authenticating fund transfers. Unfortunately, bad guys can always find ways to gain privilege to another person‘s financial information in a variety of ways. And with fast payments, tracking and identifying these breaches may come too late.
The Future is Here
Countries such as Australia, Britain, Singapore and Sweden have already adopted broad real-time payment systems. For instance, this year Australia’s Reserve Bank led the way for the creation of the New Payments Platform (NPP). Banks, government agencies, businesses and consumers can connect to this hub at the Reserve Bank for all financial transactions. It has been reported that during business hours, some electronic transactions take just four hours to complete. Other transactions can clear the bank immediately within a few seconds.
Payment processors can educate themselves on technology trends and business solutions in the payment space. They also can explore upgrading software and hardware solutions to deliver safe, secure and seamless payments for customers. This will allow your business to be ready to help your customers make and receive payments efficiently and quickly. Payment processors can also advocate for the adoption of disruptive processes and products that revolutionize the way business is done in the U.S. and beyond.