As businesses rush to offer instant payment capabilities, there’s the danger of simply checking the box rather than embedding these capabilities into a broader, more strategic money mobility framework.
This short-sighted approach risks commoditization and being left behind by more innovative competitors, Ingo Payments CEO Drew Edwards told Karen Webster.
“The trade-off, at a minimum, is that they’re going to be facing a race to the bottom, which every company does when they focus on a transaction for a fee that then scales,” Edwards said as part of the “What’s Next in Payments series” on trade-offs. “Competitors come in, and you have no walls to defend that.”
Quick wins fade; long-term strategy is what matters most.
Instant payments are now table stakes for how money moves between businesses and consumers. PYMNTS Intelligence, in collaboration with Ingo Payments, found that when given the choice, people consistently opt for speed, making it a sender’s responsibility to deliver money instantly.
Edwards said the critical discussion point is often about “instant payouts,” as the “pay-in” side is already largely instant. The exception here is for account funding from checks, cards and accounts where there is settlement and return item risk.
Not Fully Committed
However, many businesses, particularly FinTechs, have not fully committed to the potential of instant payouts.
“They haven’t gone all the way,” Edwards said, adding that “they’ve chosen one faster payment rail; checked the box; said, ‘OK, we did it’; and they’ve moved on to other initiatives.”
This limited approach often means companies are implementing solutions like real-time payments or push to card without exploring broader choices or innovative features such as “pay for speed,” which capitalizes on the fact that customers are willing to pay fees to have the surety of instant payouts.
The stage has been set, given that the concept of “money mobility” has evolved through the past few years, Edwards said. Initially centered around a single bank account, it has shifted as consumers embrace numerous specialized accounts — from investment platforms like Robinhood to savings accounts like Marcus.
Capitalizing on Recurring Income
A greenfield opportunity for instant payouts lies with their application to recurring payment flows, especially those serving the burgeoning gig economy and individuals with multiple income streams — so payouts become the “new paycheck,” Edwards said.
Webster said focusing on recurring flows is akin to “capturing a different relationship with that receiver by giving them a mechanism to take that payment and [in doing so] create a different branded relationship with that sender.”
“We’ve moved past that world where we all pick a bank, we go stand in line, we open a relationship, and we use their money mobility,” Edwards said.
Instead, each payout represents a potential deposit, an opportunity to build a new account relationship, with the chance to wrap layers of value into those relationships, forging ecosystems and a “delightful bank account” experience that is interoperable across a range of activities, he said.
“It’s a win-win-win scenario,” he told Webster, benefiting Ingo Payments, its partners and receivers, and leading to improved visibility, data and enduring relationships that transcend the initial transaction.
Ingo’s Blueprint: Owning Risk and Reshaping Economics
Despite the opportunities, many senders do not yet fully recognize the potential to rethink their payout workflows and need the aid of a provider like Ingo.
“Right now, at least in my universe, they are all consumed with the cost of these payouts and whether or not they have margin in them,” Edwards said. “On top of that, they’re consumed with the risk. They ask, ‘What about fraud? Am I earning enough to even make up for the potential of somebody taking me to the cleaners on fraudulent activity? Am I doing anything [here that I don’t understand] that’s going to get me in trouble down the road?’”
There’s a common denominator, as none of these firms are in the banking business and therefore can lack a deep understanding of payments, risk and financial services.
“The very definition of [embedded banking] is to embed a new banking relationship into a non-financial solution,” and this can be daunting, Edwards said.
Ingo Payments steps in to dispel those doubts and own the entire burden of cost, fraud, risk and compliance, effectively making it a turnkey operation for partners spanning verticals such as restaurants, property management, gaming, daily staffing or trucking.
Ingo’s model, built on experience with embedded check cashing solutions, aims to transform payouts into embedded banking relationships. The company’s platform underwrites inbound money flows into the prefund account and issues new accounts to recipients of payouts with Ingo handling the compliance and risk. However, these new accounts are not just prepaid cards with limited functionality and economics wrapped around breakage. These instantly provisioned accounts come with branded mobile banking experiences that offer recipients a range of money mobility choices — from cashing checks and pulling money from other accounts to P2P transfers, bill pay, ATM access and, of course, spending. The model aims to capture existing economic activity that would otherwise flow out of the ecosystem to traditional banks, such as Chase or Bank of America.
“At the end of the day, everybody’s got better visibility, better data,” Edwards said, “… and these are relationships that last even after that transactional [part of the] relationship ends.”
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