Digitization and the rapid evolution of online capabilities over the past 20+ years have created a market where consumers want immediate access to everything. As discussed in our previous post, businesses are rapidly shifting to instant payments and developing new use cases that benefit consumers and businesses.
Giving consumers more financial control
With 61% of Americans living paycheck to paycheck, and 40% saying they would struggle to come up with $400 for an unexpected expense, there is a strong consumer need for faster or earlier access to earned wages. Fintechs like Dave and EarnIn have addressed this demand allowing consumers to gain early access to their wages before payday. The faster access to funds makes budgeting easier and allows people to avoid overdraft fees or high-interest debt to cover unexpected expenses.
These apps can help to solve endless debt cycles and improve financial outcomes for consumers. According to the Consumer Financial Protection Bureau, more than four out of five payday loans are rolled over or renewed within two weeks. This means that loans are not being repaid. Early wage access products and platforms provide access to hard-earned pay that wouldn’t be possible without instant payments, helping millions of Americans to stay out of perpetual debt and improve their financial wellness.
Corporate acceptance
In a tight labor market, businesses are looking for ways to attract and retain employees.
According to research from DailyPay, the rate of people quitting their job has increased by 102% over the last ten years. However, layoffs are down 23%, indicating that most workers are seeking new positions that offer better pay and benefits.
A recent report indicates that 51% of workers would consider switching jobs for more frequent pay. Recognizing that on-demand pay can be a strong selling point for potential hires, some corporations now offer them as an employee benefit, especially as instant access to funds has become more ubiquitous. Fintechs like DailyPay, Everee and Gusto have made same-day pay a reality for employees as part of their overall offering.
DailyPay research notes that organizations incorporating instant payments into their benefits have seen an average of 50% decrease in turnover, a 49% increase in employee productivity, and a 26% decrease in absenteeism or “quiet quitting.”
As interest and education mature around instant payments, more corporations will offer earned wage access benefits to attract and retain employees by providing the immediacy workers want and sometimes need.
B2B payments
The expectation of instant payments capability is now extending to B2B transactions, especially as younger, digital-native workers rise to management positions. According to a 2020 study, 80% of business transactions are expected to go digital by 2025. Instead of invoicing and waiting weeks or months for payment, businesses can pay and be paid instantly through platforms like Melio and Veem supported by TabaPay. The digitization of accounts payable and accounts receivable transactions enable businesses to collect payments faster, manage their cash flows more closely, streamline their receivables, and make simpler cross-border transactions.
Becoming the standard
As the demand for instant payments continues to grow, so will the need for easy-to-implement and reliable instant payment origination. Many businesses are turning to embedded finance platforms and enablers like TabaPay, to move money quickly and easily without PCI compliance or lengthy development cycles. Instant payments will soon become the norm for payments and businesses, and we are interested to see which new use cases and businesses emerge and transform how people pay and are paid
