Published by Payments Source
The digital revolution isn’t coming. It’s already here. Businesses and consumers are no longer willing to wait for a check to be processed or for an automated clearing house (ACH) transaction to clear. They want their payments in real time, and they don’t want to squeeze another trip to the bank into their already jam-packed days.
“We’re in the middle of a digital transformation in the economy,” says J. Christopher Ward, EVP, Head of Treasury Management Product Management and Operations at PNC. “As people continue to use real-time transactions, they are creating a completely different experience between a consumer and a business.”
Since 2002, the peer-to-peer (P2P) payment market has exploded, and Aite Group predicts that P2P payments will be a $316.6 billion market by 2020.1 This growth is being driven by a convergence of advancements in financial technology, consumer demand, and the now-ubiquitous use of smartphones, says Eric Foust, senior director of product management at Early Warning, a financial technology company. “As more consumers are integrated into digital banking platforms, that’s going to present a big opportunity for corporate banks to make things more efficient and meet consumer demand,” he adds.
Faster for Customers
To transition customers into a real-time system, businesses first invite customers to opt in to receiving digital payments. The only information the business needs is a customer’s email address or mobile phone number. This eliminates the need for a business to collect customers’ personally identifiable information (PII).
To make a payment, the business sends the payment to their FI’s distribution platform, with the recipient’s email address or mobile phone number. Recipients already in the network receive a notice that the payment has been posted to their bank account.
If recipients haven’t joined yet, they will receive notification of the pending payment and instructions on how to register with the system. “Electronic payments speed up the payment process and give the disburser better visibility into every transaction,” Foust notes.
Safer for Businesses
It’s not only faster and more efficient for businesses to move to a digital disbursement payment platform, it’s also safer because it ensures that the payments get into the right hands and are not stolen or lost in the mail, which sometimes happens with checks.
To mitigate that risk, businesses have been moving to ACH systems. While an improvement over traditional checks, an ACH payment system requires businesses to keep—and secure—customers’ bank account and routing numbers, which requires the business to take on more risk.
Another concern is it can take two days for an ACH transaction to clear. Using a digital disbursement platform, a business can send money directly from its bank to a customer’s account using an email address or a mobile phone number. The transaction is typically completed in a matter of minutes and companies don’t have to store sensitive payment data.
Skip the Check
Despite technological advances, checks are still the primary currency used in business-to-consumer (B2C) transactions. In a 2015 study, Aite Group calculated that the U.S. economy could save an average of $3.3 billion in B2C check issuance costs by converting to electronic disbursements.2 And that doesn’t include the customer service headache of tracking down missing checks or late payments.
“These are exciting times for digital payments.” Foust adds. “Consumers are demanding fast, easy, and safe payments; forward-looking banks want to offer that to them while being more efficient and reducing costs. Disbursements with Zelle gives them direct access into where a payment is at all times so it’s a win-win.”
 “As P2P Payments Increase, So Must Fraud Controls,” Bank Innovation, Aug. 16, 2018.
 “Business-to-Consumer Disbursements: The Check’s… in the Mail?” Aite Group,” Dec. 3, 2015. (found here: https://aitegroup.com/report/business-consumer-disbursements-check%E2%80%99s-%E2%80%A6-mail)