The pandemic has put a fine point — an exclamation point, really — on the need to make disbursements more efficient by digitizing them. Part of that efficiency can be seen in the form of speed, which can make all the difference to the person on the receiving end of that remittance. For them, speed can make the difference between paying a bill on time or having the stress of late payments. According to PYMNTS research, it’s an issue that haunts roughly 60 percent of Americans who live paycheck to paycheck.
Part of the solution to bridging this divide can come from real-time payments. PYMNTS research shows that about six in 10 consumers say they would choose real-time payments if offered for disbursements. “If offered” is a crucial point as roughly half of the individuals surveyed said they were unfamiliar with instant or real-time disbursements, chiefly because those options were not offered by any entity that pays them.
To that end, a panel of payments executives told Karen Webster that there’s an urgent need to change the faster payments landscape and that governments and relief organizations must change the ways they get essential payments (like stimulus payments) to those who need them most, whether the recipients are individuals, families or even small businesses.
The panel included Chiro Aikat, executive vice president, products and innovation, North America at Mastercard; Rob Tarkoff, EVP and general manager at Oracle; and Drew Edwards, CEO at Ingo Money.
At a high level, Tarkoff stated that the most pressing concern when it comes to speeding up stimulus payments rests with eligibility. “Anytime you’re moving into a push payment or distributed payment scenario, you’ve got to make sure you’re getting the money to the right people who actually qualify for the funds,” he said.
And it’s of the utmost importance that the funds are distributed with that “correct” eligibility 100 percent of the time. Governments will need to make sure the needs of a targeted cohort — say, all families that make below a certain income threshold — are receiving what they’re meant to receive. Tarkoff noted that Oracle has been working with several cities and states on developing eligibility rule sets (solving for what might be thought of as “upstream eligibility”) and streamlining decisions of who gets the aid and how that aid will be distributed.
“We’re seeing a lot of states trying to use push payments to get this kind of distribution done quickly, particularly for people who don’t have bank accounts and need to get the money,” he told the panel. And in getting that aid, said Mastercard’s Aikat, people want to access digital devices, phones and tablets as they send and receive money — part of a secular shift occurring across all types of transactions. Most importantly, they want it all done in real time, or at least near-real time, with a range of payment choices on offer.
Pushing The Government
Multirail strategies such as those embraced by Mastercard can enable that choice, Aikat said, where consumers can get or send payments through multiple channels. In one example, Mastercard and Oracle have teamed up to send emergency assistance through Mastercard Send and prepaid solutions for real-world, real-time use cases. The government can be thought of as the first responder amid the pandemic, agreed the panelists, where aid has been approved by lawmakers and sent out over periods of days — not months — as had been done during previous periods of economic stress.
That’s the ideal, of course, but much remains to be done, according to Edwards. “I think the government sector has a long way to go” in streamlining and speeding the fund flows, he said. The fact that tens of millions of checks are being sent out the “old-fashioned way” — through the mail — rubs a bit of salt in the public relations wound that has formed as a significant number of checks have been stolen or lost.
There’s at least some cue to be taken from the private sector, maintained Edwards, where insurance and ad hoc business payments — the kinds that happen every day — are marked by speed and flexibility.
“My personal opinion is that corporate America will beat most of the public sector to the punch here, just because of the readiness of their systems,” predicted Edwards. “There’s a lot more technical debt in place with the public sector than the corporate realm, and modernization is a challenge, particularly when it comes to digital, contactless disbursements.”
There are some stirrings of how much faster, more secure disbursements can be done among government agencies and other (not-for-profit) entities, said Aikat — particularly among philanthropic organizations, which Aikat said may not be subject to some of the same regulatory mandates as other types of transactions. Digital ID efforts are part of the process, he said, and so are payments that don’t necessarily make their way to bank accounts. In other means of distribution discussed by the panel, some benefits programs load funds onto prepaid cards that can be accessed anywhere Mastercard is accepted.
In Edwards’ words, the use cases that tip the scale need not involve huge tranches of stimulus rounds involving hundreds of billions of dollars. The overall mental shift to digital is going to leave, as he said, “very little room for tolerance of the way things have been done in terms of checks in the mail.”
And against that backdrop, the data from insurance companies, lenders and treasury banks shows a split along generational lines when it comes to discovering just how recipients want to get paid. Younger consumers want to have money pushed to debit cards rather than ACH, for example, namely because the card is always at hand and always in use. But no matter the end consumers’ choice, said Edwards, treasury banks will remain a key part of the disbursement equation.
“To me, it can’t work properly without the banks,” said Edwards of aid disbursements, even though they are still mired in paper checks and batch processes.
Accessibility and ubiquity are important to consumers, noted Aikat, and Mastercard has been busy building digital products where the whole notion of a physical card is complemented by a digital token in their wallet.
“I also think as consumers look at having access to funds [in] real time, they also want the ability to access them on their mobile phones and use that at the physical point of sale,” he said.
The Balancing Act
There’s a balancing act that must take place — one that is thrown into stark relief by the initial efforts of the Paycheck Protection Program (PPP) — between the need for speed and integrity (getting funds to the right recipients) and serving populations that may never have had access to traditional financial channels and need to trust the process of financial inclusion.
Tarkoff said that good software design makes all the difference. “You don’t want to create models and designs that are overly complex and result in too many exception cases. But you also want to make sure that you have a pretty clear way of distinguishing those who are eligible from those who aren’t,” he told Webster. “They’re never perfect, but you can design a system so that the margin of error is acceptable in the scheme of things. We’ve spent a lot of time designing systems that do that for the public sector.”
Aikat told Webster, as the pandemic and other emergency aid quickens, goes ever more digital, and gives way to real-time, secure payments to governments, small businesses and gig workers: “It’s not just about the easy access to funds. It’s also about safety and security throughout the process. The consumer’s confidence is very important to keep.”