In just a few short months, the face of commerce in the U.S. has been dramatically changed. According to Forbes, just over 306 million Americans have been affected by state-mandated stay-at-home orders, which has resulted in a rapid shift to e-commerce channels. In fact, Forbes reported that "U.S. retailers' online year-over-year (YoY) revenue growth is up 68 percent as of mid-April. And there's been an impressive 146 percent year-over-year growth in U.S. and Canadian e-commerce orders as of April." Of course, the growth in e-commerce has been going on for some time, but COVID-19 has certainly accelerated that trend.
Another key trend during this health crisis, has been the shift to contactless payment options. This consumer trend has been clearly evident in grocery, restaurant, retail, fuel and healthcare payment ecosystems. A recent study showed that as of May 2020, 50 percent of U.S. consumers had used contactless payment methods at least four times, while 69 percent expressed the opinion that contactless payments were preferable to cash.
While consumers increasingly have shown a preference for making payments through digital options, there’s been an equally important shift in their preference for receiving refunds and other disbursements electronically as well. With increased smartphone use, PYMNTS.com reports consumers’ growing appetite for mobile apps that can receive instant disbursements for multiple uses.
According to Aite Group, U.S. companies make more than 1.9 billion payments to consumers annually. These disbursements typically are for things like insurance claims, rewards, reimbursements, refunds, rebates, and payments to gig workers and other types of freelancers.
Business-to-consumer (B2C) payments have traditionally been made using paper checks, due to their off-cycle nature and the hesitancy of consumers to provide sensitive data among other reasons. Even in the face of innovative payment options, more than a third of B2C disbursements are still made by check. However, in this time of COVID-19, being paid by check is viewed as too slow and unnecessarily risky, particularly in the case of gig workers, who are demanding faster payment methods. In addition, paper checks require going into a bank or using an ATM machine, which are both seen as higher risk activities.
Digital disbursements also make a great deal of sense for businesses. They provide fast and secure payment delivery options that consumers and workers want, while simplifying the time-consuming task of paying large numbers of recipients. Taking a digital approach also improves the efficiency of payment processes, offering real-time reconciliation and tracking, which can reduce operational cost. B2C disbursements are contact-free and COVID-friendly in the sense that funds are deposited directly into recipients' bank accounts the same day, or nearly instantly credited to their debit or prepaid cards. In those cases where financial account information is not accessible, social tokens, such as email addresses or mobile phone numbers can be used as another secure way to pay recipients.
COVID-19 has put strains on nearly all types of businesses. In today’s dynamic and uncertain marketplace, leveraging every business advantage is crucial. To remain competitive, businesses are increasingly turning to digital disbursements. This is especially important for companies in the gig economy, where workers expect payment immediately. They don’t want to wait until the next payroll cycle to get paid. In fact, a PYMNTS.com survey found that 84 percent of gig workers indicated they would actually work more if they were paid faster.
While faster payments make perfect sense for the gig economy, it turns out the speed of disbursement has compelling applications for other types of businesses who are looking to gain a competitive edge. Take for example the insurance industry. Digital disbursements are ideally suited for making claims payments, whether they be for accident repairs, damage from a natural disaster, replacing property after a theft, or making reimbursements to policy holders such as with COVID-19 related premium refunds. Policyholders have demonstrated a clear preference for real-time digital disbursements options like push-to-card and direct deposit over waiting for a check to arrive in the mail. These types of payments can dramatically improve the customer experience and strengthen the customer relationship.
Similarly, insurance disbursements in the healthcare arena can be greatly improved using digital platforms. As COVID-19-related claims are being processed in rising numbers, the need to issue reimbursements in a timely manner is vital. A PYMNTS.com article from this past June proffered, "Insurers and their payment providers have been racing to address a flood of new requests and claims over the past few months, and many are finding just how inadequate the payment processes they have in place are for this task." Digital disbursement may offer a means for improving these processes, while ensuring that funds get into the hands of patients who need them quickly.
A final example can be found in the gambling industry. With brick-and-mortar casinos shuttered by the pandemic, many players have turned to online gambling. This has put pressure on casinos that offer online gambling to adopt digital disbursement channels as an effective means for delivering pay-out winnings quickly. Online betters want the same rapid access to winnings they would have at a brick-and-mortar casino, making it imperative that online gambling match that experience.
Just as changing consumer behaviors have accelerated the adoption of digital commerce, they also are driving the demand for digital payouts. The digital disbursement of funds enables businesses to move money with the same flexibility, convenience, and positive experiences created by digital commerce - while enabling contactless interactions and instant funds delivery.
For many businesses, embracing digital disbursements is being done out of necessity to meet the demands of COVID-minded customers and employees. But the advantages of these B2C payments for both customers and businesses is good reason to believe they will continue to grow in popularity well into the future. Understanding how they work and how best to utilize emerging payments platforms may very well be one of the smartest investments a business could make.
A recent PYMNTS.com interview, What It Will Take For Business To Finally Get Rid Of The Paper Check, highlights the benefits of digital payment solutions.