For faster B2B payments to advance, recipients must opt in
There are many motivations for implementing faster payments, such as paying gig economy workers after each job, sending funds overseas, or improving insurance payouts. In all of these examples, the demand comes from the payments recipient.
Checkbook.io, a company that aims to eliminate paper checks for B2C and B2B payments, has thrust itself into an increasingly competitive faster payments market by allowing the recipient to choose whether the payment should be made immediately over debit rails or more slowly over ACH.
Instant Pay is an option attached to a digital check that businesses send via e-mail. If the recipient agrees to the faster payment, it is sent to a debit card account they provide, with funds going through Visa Direct or Mastercard Send.
The San Mateo, Calif.-based Checkbook.io has provided input for the Federal Reserve's faster payments initiative, but will now have its own example to point to with the Instant Pay option for businesses delivering digital checks through Checkbook.io to vendors, suppliers and consumers.
"We were part of the Fed's faster payments group committee and got involved late last year when the Federal Reserve requested comments on real-time settlement," said PJ Gupta, Checkbook.io CEO. "The world is moving to real time and there is no doubt about that, and we want to be in the forefront of that."
Yooz is a partner in Checkbook.io's operations, providing the automation software for the accounts payable process. Partner Bevager.com provides the technology to enable Instant Payments for cash accounts.
"We want to eliminate paper checks and streamline onboarding," Gupta said. "The specific use cases for Instant Pay include an insurance company trying to get disbursements out to 10,000 victims of a hurricane."
Faster digital check payments are becoming fairly common, but a February 2019 report on B2C payments by Aite Group indicates that doesn't always equate to all businesses or consumers taking advantage.
Because U.S. businesses tend to stick with slower payment methods, 68% of consumers received a disbursement through direct deposit, while 49% still received paper checks, even if on a direct-deposit program, the report stated.
The Aite research also indicates consumers want immediate payments when they are owed money, as 65% said it is important for government agencies or businesses to deliver instant payments, and 70% said they would choose that option if it were offered.
"The technology has been around for a few years, but has really started gaining momentum," said Talie Baker, senior analyst at Aite Group. "The P2P companies, Square Cash in particular, were the first to use this push-to-card technology."
As consumers become more accustomed to digital payment methods, the instant payment options appeal to them because they facilitate payments directly to the consumer bank account without the hassle of providing account and routing information, Baker added.
"Additionally, they are trusted payment methods since they are backed by and, in some cases, provided by banks," Baker said. "Companies are beginning to use payments as a way to improve the overall customer experience and providing real-time payment capabilities is a big differentiator."
Checkbook.io's Instant Pay would benefit any business seeking to make payments without having to wait on recipients to fill out applications or provide information like bank routing numbers, CEO Gupta said. Those cases could also include payroll, contract workers, rebates, refunds, or payments to departing employees, he added.
The digital checks have no bank routing numbers or other information that hackers generally seek.
"Basically, we have solved a two-sided problem where sender and recipient have to enroll in a service, by making it one-sided," Gupta said. "In many cases, a payment sender does not have the recipient's bank information to send money, so they don't have an option like ACH, wire transfer or using credit cards."
Instant Pay users need only the recipient's e-mail address to send a payment. Checkbook.io deploys tokenization on any payment data at rest, while payments in transit are encrypted.
"We are doing hundreds of millions of dollars in our run rate and fraud is 0.1%," said Gupta, who worked as the chief network architect at Visa before rounding Checkbook.io.
Checkbook.io launched four years ago, and has taken about the amount of time it takes any payments company to build an end-to-end system and establish bank relationships, Gupta added.
"The world has moved on from ACH transactions and we have to be able to get the money moving faster," Gupta said. "That has been what we have been working on in getting to this major innovation [of Instant Pay] and coming into the current age."