Today’s financial service providers have proven their ability to provide expedited payment options. However, when it comes to expedited payments, there is a clear delineation between when financial services providers (FSP’s) can deliver them and when the people using these services expect them. Providers are working hard to move closer towards real-time delivery. Still, no matter how providers improve the speed of service, it will never match the expectations of consumers, who simply want delivery now and aren’t willing to wait for it. This demand for increased speed goes beyond their desires for instant access to their money and credit; it also extends to their information.
Here’s the rub for providers, though: If you can’t find an affordable way to meet these demands for accessibility and information, consumers aren’t worried. Why? Because they know if you can’t, one of your competitors soon will. The downside for you is that monetizing this anyone, anywhere, anytime payment and information delivery strategy is difficult. The truth is that, although consumers demand it and expect it, they are reluctant to pay for it. However, even without the promise of premium fees, there are still good reasons to pursue delivery. The value in doing so lies in two main areas:
- Customer Loyalty. The people who already bank with you do so in large part because they trust you. Providing expedited payments is just one more way you extend that trust to your valued customers. In fact, recent studies indicate that 55% of consumers prefer to utilize expedited payment services from their primary financial institutions. This same pattern, with similar numbers, repeats across an array of expedited payment types, including outbound foreign money transfers, P2P payments, A2A transfers, and bill paying. Providing such services effectively removes one potential reason existing customers might consider leaving.
- Cost savings versus traditional information exchange methods. Providing the information customers require through digital channels rather than the traditional ways offers cost saving that can make up for the lack of premium fees from expedited payment services. Maintaining a traditional paper-based information exchange requires more people using more storage space using archaic transfer methods that can be less accurate, and all this drives costs upward. Add to this the burden of employee and infrastructure costs in opening and maintaining call centers to handle the volume of customer requests and the bill skyrockets.
As far as revenue, though, the expedited payment services offer plenty of it, as long as you can keep it simple, make it work, and actually deliver on the promise of anyone, anywhere, anytime. Here are two examples, both of which also offer that rare combination of tangible consumer value paired with exceptional revenue opportunities:
- Money Movement. Although still not widespread, financial institutions the world over are committing to expedited payment strategies that involve money transfers. Real-time money movement resonates powerfully with today’s online banking consumer. They indicate high levels of interest in using real-time payments for a significant portion of their transactions, whether this involves bill paying or transferring money from person-to-person (P2P) or account-to-account (A2A). What matters to them is immediacy, making sure that the money gets where they want it to go and is quickly put to use for the intended purpose. A recent study revealed that 80% of overseas money transfer users believe it’s important for their recipients to be able to use the money they send to them immediately. Also, 58% of A2A users and 41% of P2P recipients want to have immediate access to their funds. The keys to success are making transfers accessible, simple, and fast, which are not easy tasks. But the provider that can manage this may find revenue where others can’t.
- Instant Gifting. There are many angles in play with instant gifting, something that is becoming increasingly popular with consumers. The basic idea is that people can select a gift in the form of a card, coupon, or certificate from either the Internet or a mobile app and send it to a recipient. For the recipient, the gift is instantly redeemable. It’s an area with much movement as companies jockey for prime position while still searching for the perfect instant gifting mechanism. Here are two popular instant gifting strategies worth highlighting:
- Gift Cards. Still the most common and most popular form of instant gifting, the use of gift cards is on the rise, and with good reason. Purchases made with a gift card are between 20% and 50% higher than the average purchase price. They continue to be among the most popular gift choices, especially at Christmas time, where 39.2% of shoppers will purchase a department store gift card for friends and family, followed by 33.4% of shoppers opting for a restaurant gift card.
- Facebook. The social media giant is a big player in instant gifting, both from their site, initiated last Christmas, and through the Facebook gift card, launched earlier this year. In fact, the card has been so successful (80% of purchases are cards with just 20% in physical gifts like mugs, pens and such) that Facebook is reportedly considering phasing out the ability to send physical gifts through the site. The card comes preloaded, if you will, with a designated gift amount available for spending at one of four retailers: Target, Olive Garden, Sephora, and Jamba Juice. However, Facebook is considering adding more merchants.
One of the keys in making expedited payments work involves familiarity. Facebook succeeds in its gifting because it has a vast user base. Gift cards work because both the giver and recipient recognize the merchants involved and frequently shop with them. While there are alternative providers actively working the market, and more appear every day, the simple truth is that consumers prefer to do business with institutions they know and trust, like the local branch of their bank. This trust extends to the area of expedited payments.
In a recent study, we asked consumers how real-time payments might impact their relationships with their financial providers. While the majority agreed that real-time payments provide a safe and secure way to send money while making banking more convenient, most of these consumers want their primary financial institutions to provide them with expedited payments. This trust presents a sizeable opportunity for those primary financial institutions who can offer their valued clients what they want in the real-time payment arena.
Exactly how big is the real-time payment opportunity? While that can be difficult to quantify over the broad spectrum of banking behaviors and available methodologies, our research estimates the annual revenue opportunity for real-time outbound money transfers offered through U.S. bank and credit union online and mobile banking services to be more than $1.1 billion. That’s one segment. Capturing that requires a consistent marketing effort focused on the message that expedited payments offer consumers of safety, security, cost effectiveness, convenience, and immediacy. Of course, delivering such a service requires the infrastructure and technology improvements that make it work.
If the question is, ‘Do expedited payment options provide value?’ the clear answer is, ‘Yes, they do.’ It’s just that the value they define is non-traditional, hard-won, and not easily defined. Still, it’s worth the effort for both you and your valued customers because expedited payments services are not on some distant horizon; they are on the first wave of real-time money transfers that is upon us now. It’s an inevitable occurrence, leading to another key question that impacts the future of your institution: Will you be ready when that wave hits?