How Real-Time Payments are Changing the Lending Game

[Editor’s note: This is a blog post from Cecilia Frew, SVP NA Push Payments at Visa Direct. Visa Direct is a gold sponsor at LendIt Fintech USA 2018, which will take place on April 9-11, 2018 in San Francisco.]

Faster payments have penetrated a handful of market segments, particularly peer-to-peer (P2P) payments and the gig economy, but a lot of work still needs to be done in the funds disbursements space. In our digital economy where consumers are accustomed to on-demand services and experiences, businesses providing a better and faster payment experience is no longer a “nice to have”, but has become a necessity.

There is a huge opportunity to make real-time paymentsto consumers and small businesses more efficient. Recent research conducted by Aite Group found that 80% of merchants surveyed believe that real-time payments would increase available cash flow2, which not coincidentally, over one-third of U.S. small businesses surveyed identify as a major challenge to running their business3. Solving how small businesses access their money, on their schedule, is incredibly important to running a business the right way.

Most people think about real-time payments4 in a ‘send’ capacity, but there’s another side to that which is arguably more important to small businesses and consumers who need a loan, and that is to ‘receive’ a payment. 2017 US Digital Lending Landscape, a white paper by S&P Global Marketing Intelligence, projected that digital lenders will originate $62.84 billion in new loans in 2021 across personal, small and medium enterprise, and student-focused segments, representing a compound annual growth rate of 16.5%. This is a significant amount of money that will be disbursed to consumers and small businesses, and a way for lenders to capitalize on this growth will be to offer real-time disbursement options.

Visa Direct offers a real-time5 push-to-card payment solution that enables online lenders to approve loans and deliver funds the same day, backed by Visa’s world class risk management and analytics, and helps online lenders harness industry leading payments innovation and support responsible lending. With the help of Visa Direct, small business owners and consumers can have access to a faster payment experience than checks or ACH by using eligible debit cards they already have.

Anyone waiting for money, whether it is a small business or personal loan, bi-weekly paycheck, or a payout from an insurance provider, likely needs that money fast. However, the reality is that current methods like checks and ACH are still very prevalent in the lending space, which can take days or weeks to get to borrowers’ hands. Visa Direct can help make it easier and more efficient for lenders to offer funds disbursements faster to their customers.

Visa Direct can help you solve one of the biggest issues when it comes to personal and business loans: enabling fast access to funds when customers need it. Business disbursements such as online lending, insurance claim payments, contractor payments and many others, and funds transactions can be processed in real-time versus 1-3 days for ACH or 5-7 days for checks.

By incorporating a fast payments solutions, like Visa Direct, into offerings for business owners and consumers, digital lenders can shorten wait times, increasing customer satisfaction and tap into groups, business owners and consumers who rely on easy disbursements and quick access to cash flow.

Lenders can benefit greatly by incorporating fast payment solutions into their offerings, providing a better customer experience by offering fast access to capital to small businesses and to consumers who need funds.

References

(1) Actual fund availability depends on receiving financial institution and region.  Visa requires fast-funds enabled issuers to make funds available to their recipient cardholders within a maximum of 30 minutes of approving the transaction.

(2) Real-Time Funds Disbursements: Right on the Money, survey conducted by Aite Group and commissioned by Visa, March 2018

(3) WASP Barcode Technologies, 2017 State of Small Business Report; WePay 2017 SMB & Money Survey

(4) Actual fund availability depends on receiving financial institution and region.  Visa requires fast-funds enabled issuers to make funds available to their recipient cardholders within a maximum of 30 minutes of approving the transaction.

(5) Actual fund availability depends on receiving financial institution and region.  Visa requires fast-funds enabled issuers to make funds available to their recipient cardholders within a maximum of 30 minutes of approving the transaction.

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