Consumers sidestep instant disbursements, opt for slower alternatives instead
- Despite a growing interest in instant payments, what's stopping consumers from choosing this option?
- Consumers harbor concerns over security and associated fees, eventually leading them to pass up instant alternatives.
FedNow’s recent launch has catalyzed the expansion of instant payments in the US, further sparking interest among consumers to receive disbursements in real-time. 68% of consumers would choose an instant disbursement if given the option, according to a new report by PYMNTS and Ingo Money.
While consumers, regardless of age, are generally migrating away from traditional payment methods toward digital ones, the preference for instant disbursements varies across different age groups. 77% of Gen X are inclined toward instant disbursements and more than half (56%) of Gen Z are willing to go down this route.
Why do consumers have second thoughts about instant payments?
While these statistics may paint a picture of the growing adoption of instant payment systems capturing a sizable market, the report indicates a disconnect between consumer demand and payer supply. Only one in five consumers received some type of disbursement instantly in the last 12 months. Except for product purchase-related disbursements that saw growth of 28% during June 2022, all the remaining categories of non-government disbursements saw a tail-off during the same period. This means that many issuers are still far from extending instant payment options to their customers.
This is not the only stumbling block. The slump in adoption may have also stemmed from the fact that although consumers desire faster payouts when they are owed money, security and trust concerns hamstring many of them – eventually leading them to pass up instant alternatives. Despite having the availability of instant payments, 36% of consumers pulled back because they were skeptical about sharing their card details, 34% fretted that the payer would deposit the payment into the wrong account, and 33% relinquished instant payments because they weren’t comfortable sharing their financial data.
The report also highlights shifts in adoption patterns across different demographics when it comes to leveraging instant disbursements. The consumer segment between Gen X and Millennials – 35 to 45 years old – holds back from sharing their card information (48%) or their bank account information (47%) when choosing a payment method. This percentage decreases by almost half when it comes to Gen Z. 25% and 21% of younger consumers are reluctant to share their card information and bank account details, respectively. Moreover, 52% of this generation would choose another payment method if provided with better incentives.
In addition, consumers want instant payments – at no cost. 65% of consumers would consider opting for instant disbursements when no fees are charged. While a portion of consumers will pay to get things done faster and equate service fees as a convenience cost, others are less willing to pay for them and are increasingly turning to other alternatives that might be slower but save them money. Only 26% are willing to pay the associated fee to receive their payments instantly. This segment includes consumers who may be financially stretched and require loan disbursements right away.
The impediments to the adoption of instant payments – unavailability of instant options, lack of consumer trust, and fees – indicate that issuers may have to devise new strategies to meet growing consumer demand. Additionally, issuers and consumers will most likely have to establish a middle ground to improve their relationships and build customer loyalty to foster adoption going forward.