Wespay’s Instant Payments Brief is a series of short articles designed to help members understand the key concepts of the next generation of payment services.
Understanding which of your clients would be a good fit for Instant Payments is key to developing your FI’s Instant Payments strategy. Below are three key features that FIs can use to evaluate clients who may benefit from Instant Payments.
Because Instant Payments are by nature always credit transactions and feature instant clearing capability, bill payment customers are afforded a great deal of control over their cash flow and bill payment schedule. As the sender/initiator of an Instant Payment transaction, bill pay customers are able to more effectively control their payment schedule including making payments on their due date without the need for special, expedited processing.
Instant Payments are irrevocable, meaning that the sender will never receive a return at a later time, unlike ACH and Card debit transactions today. This can be an attractive alternative for consumer debit originators who receive a high volume of ACH or Card unauthorized returns, where they currently have no recourse to dispute these “friendly fraud” returns. Businesses may find that Instant Payments is a way to eliminate this costly and time-consuming risk.
Both Instant Payments networks are currently priced at $0.045 per transaction, compared to less than $0.003 per ACH entry. This higher per-transaction cost for Instant Payments makes it a more compelling use case for low-volume originators who wish to deliver the new experience of instant clearing and notification to their customers. For large-volume, recurring debit originators such as utilities and consumer billers, the costs and customer impact of migrating from a reliable and economical service such as ACH may not be as compelling a use case at this time.
More use cases and justifications for migrating to Instant Payments will most assuredly present themselves as they grow in popularity over the next few years. FIs should continue to monitor how the payments landscape incorporates Instant Payments and be prepared to explain to its consumer and business customers why it has, or has not, decided to include Instant Payments in its suite of payments services.