Checks won't cut it in the 'instant pay' age

Consumer dissatisfaction with paper checks is at an all-time high, expectations for instant money is becoming the default, and the capability for real-time push payments has arrived.

A number of recent studies have documented the disfavor of paper checks. Consumers are simply fed up with the wait and frustration of this outdated payment instrument. For years, its ubiquity and acceptance have buoyed its use, but the paper check can no longer compete with instant everything.

In a day and age when same day grocery delivery and instant downloads are realities, it’s no longer acceptable to wait for a paper check to arrive in the mail, sweat out 3 to 5 days for funds to become available, and then fear that it could bounce. Consumers now expect money to move at web speed, be instantly available, and safe to spend.

Andrew Harrer/Bloomberg

Push payments make this possible. Essentially debit transactions in reverse, push payments are instantly usable and irreversible funds sent over existing networks. The bank sponsorship and compliance tools are the same, and consumers do not have to open a new account or memorize a new PIN - they simply use the cards and payment instruments they already know and love.

It’s now possible to send a push payment to more than 4.5 billion consumer accounts, including debit, credit or reloadable cards, online wallets or accounts like PayPal and Amazon, or even physical cash-out distribution points.

The government is actually leading the way. Between tax refunds or state and local aid programs, most people have received some type of digital disbursement from the government. By conditioning people to expect payment through the cards and accounts they already use, these programs are paving the way for normalizing push payments as a disbursement method.

The process of push payments only speeds up and expands the universe of disbursement options for both the payment issuer and recipient. For example, while a merchant refund might take one or more days to complete, a push payment happens in real time and funds are instantly usable.

You can imagine the applications. Insurers are already embracing the concept to digitize the last mile of their claims payouts. Lenders can offer instant loan proceeds to match instant loan approvals. And those tax returns or airline lost luggage fees can instantly show up on your debit or credit card. The beauty for payment issuers is that while push payments enchant consumers and earn both improved loyalty and satisfaction ratings, they can also significantly improve the bottom line. Paper checks can cost anywhere from $3 to $10 per check to issue. Moving to digital push payments streamlines this process and eliminates much of that inflated cost.

And the need is universal. The 78% of Americans working full time but living paycheck to paycheck want instant, irreversible deposit so they can better balance their household budgets. Small businesses want the competitive advantage of instant, guaranteed funds so they can purchase inventory or hire contract help. The list goes on and on.

The payments industry is in the midst of a natural evolution from analog to digital disbursements. Today that means we are seeing the draw down of paper checks in favor of ACH and direct deposit with the rise of push payments beginning.

Now is the time for companies to embrace instant money and realize the promise of push payments. By staying ahead of the storm, these issuers can improve their bottom line while enhancing their customer experience and corporate reputation.