Consumers use Venmo and Zelle to quickly settle shared expenses between friends, and they know the money will arrive in their bank accounts within a few minutes — or even seconds. Fast-acting P2P payments services are having a ripple effect on disbursements. Businesses can enjoy access to real-time settlements and revenue, while consumers can instantly receive funds from insurance claims or gig work instead of waiting for paper checks in the mail.
Both consumers and businesses expect immediate access to their funds, but disbursements aren’t hitting the mark. In the June 2018 Disbursement Satisfaction Index, PYMNTS asked 2,300 consumers to rank their satisfaction with their disbursement solutions on a 100-point scale. This resulted in an average score of 56.5, which is not necessarily bad but may indicate that businesses issuing disbursements to consumers — such as those that distribute insurance claims, store refunds or cash-back rewards — have room for improvement. The most recent Disbursement Satisfaction Index, published in March, noted that a significant pain point for consumers is their lack of choice in how they receive disbursements.
The following Deep Dive highlights how current payout practices are falling short for consumers, how P2P services are changing disbursement expectations and how all of this directly affects gig workers.
The state of disbursements
Consumers can receive disbursements in many ways — via direct deposit, debit card, prepaid card and P2P services — but many are not given options. Despite consumers’ preferences for other, more modern methods, some companies still use outdated forms of payment. The latest Disbursement Satisfaction Index found that 52 million consumers received disbursements in the form of paper checks. Approximately 28.5 percent — 14.8 million people — would have picked different payment methods were they given options, though.
Were they allowed to choose, 46.7 percent said they would like to receive payments via direct deposit, while 24.0 percent would prefer their disbursements to be delivered directly to their debit cards. Consumers clearly want their payments to move at a faster pace than that delivered by paper checks.
If businesses continue to deny consumers access to different payment methods, the satisfaction gap could linger or worsen, which means offering multiple delivery options is key to improving overall satisfaction.
Enhancing disbursements speed
As P2P solutions continue to proliferate, they’re causing a significant shift in consumers’ attitudes toward payments. Services like Venmo and Zelle process billions of dollars in payments each year. Approximately $19 billion in payments were processed using Venmo in Q4 2018, while Zelle processed $119 billion total last year. Funds sent using these P2P services are available in just a few seconds, indicating that consumers have a need for payments speed. In fact, according to the latest Disbursement Satisfaction Index, nearly 72 percent of consumers believe that speed is important when it comes to receiving disbursements.
Consumers’ frustrations will grow the longer disbursements fail to match the speed of P2P services. With some businesses still delivering funds via paper check, disbursements have a long road to travel before they can improve speed and, as a result, customer satisfaction.
Paying gig workers faster
Improving the speed of disbursements is also essential for freelancers who make their livings taking on work in the gig economy. In a recent interview with PYMNTS’ Karen Webster, Drew Edwards, CEO of push payments solution provider Ingo Money, said that increased disbursements speed could be vital for some workers when it comes to maintaining their livelihoods. If an Uber driver is involved in an accident and owed money for an insurance claim, for example, it could take a week to reach him, putting additional burdens on him and hurting his financial stability by forcing him to either halt work or rent a vehicle.
Two-thirds of adults surveyed for the June 2018 Disbursement Satisfaction Index said they lived paycheck to paycheck, meaning slow disbursements could be detrimental. Even workers who earn more are forced to stretch their dollars between pay cycles — 15 percent of those who lived paycheck to paycheck earned $100,000 annually, and 38 percent earned $150,000.
With such a significant share of the U.S. workforce living paycheck to paycheck, the demand for faster disbursements solutions is likely to increase. This means businesses will face considerable pressure to deliver on payments capabilities that will enable recipients to have fast — if not instant — access to their funds. P2P services have raised the stakes, and businesses will need to do whatever they can to keep up and satisfy their customers.