How certainty affects the scope of payments

Original author: Karen Webster
  • Transfer
The author of the publication discusses why transparency and guarantee of results may turn out to be more important for payment innovations than convenience and speed of transfers.

I recently decided to update cushions and went to a local workshop for their upholstery. This atelier is an example of the smallest business that can be found. A craftsman, a hard-working immigrant, huddles in a tiny room by the shop window in a town north of Boston. The owner and employee in one person, he has been here for 20 years. His work is appreciated for high quality and level of service.

My new great pillows were delivered at the promised time about a month ago. The order amount was less than 500 dollars. The master wrote the invoice for payment by hand. It indicated the name of the manufacturer, his mobile number and methods of payment, which he accepts: cash and check. Like many other representatives of small and medium-sized businesses, his workshop does not accept cards.

He is still waiting for his money. And not because I did not pay last month, - we were let down by the payment method.

I was a little alarmed when I received the bill. I have not used paper checks for more than a year. And at least a week after the invoice, I would not be able to get to my hometown to give the master cash. So I called and asked if it would be convenient for him to accept payment through my banking application or his mobile number.

At first the master was confused: for the first time he was offered this method of payment. But I explained the mechanism and also promised him that it would be easy. Under this scheme, the master will receive a text message, and then simply follow the link and read the instructions on how to receive funds for enrollment.

Problems arose the next day when I was informed that the master had not received the money. I reminded him that you need to click on the link and follow the instructions. And he replied that without the help of his bank he could not figure out what to do after clicking on the link.

At the same time, I gave him a couple more things to work that were delivered last week along with a new bill, which also includes the cost of the previous order.

When the master went to his bank, local and small, for help, the operators said that they did not support this type of payment, and that he needed to contact a manager who would return in a day. I sent the payment to the personal account of the individual and, I suspect, it is also used to conduct business.

Neither the master nor his bank could figure out how to transfer my payment to the account. Zelle had not yet reached this small bank, and the instructions for accepting the transfer were not clear enough even for its employees. In any case, I understood the retelling of the conversation with bank employees.

As a result, the master abandoned the idea with the bank. He has a PayPal account, and today I will pay with him in this way.

I think many of my readers hold accounts in one of the 18 large banks that work with Zelle. And, probably, they now thought that there was no problem as such. After all, how much can you expect from a simpleton who uses the services of a provincial bank?

However, the fact that a large number of small and medium-sized businesses work in the same way and use the services of 13,198 banks that have not yet joined the Zelle network is ignored. Most of these financial institutions are small and provincial.

My story does not criticize the Zelle network. I use their application, and it is convenient when it works as it should. The service makes every effort to simplify and accelerate the payment process, minimizing the amount of routine when connecting to such small banks.

The main message of the story is to recall that payment innovations are only useful to the extent that the result of their use is predictable.

Uncertainty creates a sense of confusion, which quickly develops into stress, especially when it comes to someone's money. A stressful situation interferes with the completion of the payment process.

In such cases, people turn to proven and reliable methods. And it does not matter what it is about - the treasury operations of the world's largest companies or a small furniture workshop on the north coast of Boston.

Dislike for obscurity

The easiest conclusion from the above example: the ubiquity of the service and confidence in the results of its work are two sides of the same coin. But that's not the point.

Like most working Americans, my master has a bank account. In theory, sending funds directly from an account to an account that is available at any US bank does not seem to be a problem.

But at least not everything is so simple today. The result is not even close to predictable.

Every second account holder is likely to encounter difficulties in direct interbank transfer and will not bring it to the end. This fact makes me and other similar senders with negative experience think about the unpredictability.

PayPal accounts are used250 million people worldwide, but an even greater number of them have bank accounts. About 230 million Americans, that is, almost 93% of the adult population of the country, hold a bank account.

But the transfer result with PayPal is more predictable for both the sender and the recipient. Holders of a PayPal account know how to accept money in this system and easily transfer it to a bank account if necessary.

People with a bank account not connected to the Zelle network are not so sure about the successful outcome, even if there is a way to activate the account on the network and accept the funds.

It turns out that if both parties to the process have PayPal, then they know that the system will work. When one of the participants has a bank account, none of them can be sure that the transfer will succeed.

The uncertainty as a result of the operation will affect all my further decisions about sending funds. This means that instead of choosing a bank account, I will ask the second side whether it has a PayPal account.

If the universality of the service does not support users with a sufficient level of confidence in the result, then uncertainty rules the ball.

Certainty as a catalyst for change

Universality is nirvana in the world of payments. It is for this reason that Visa and Mastercard have become powerful international brands. Consumers know that payment methods associated with these companies work reliably with tens of millions of merchants around the world. And this creates confidence in the final result.

Retail payment innovators are already enjoying the benefits of universality and certainty, thereby expanding their audience.

PayPal and Amazon users indicate in their accounts payment options branded by Visa and Mastercard, and use them when making payment transactions on websites without having to enter a card number and other information. "Payment buttons" signal to the consumer that in this place a stable and secure payment experience awaits him.

Payment systems come up with new, fast ways to transfer funds based on debit cards and provide companies with another option of guaranteed, instant delivery of money to customers' bank accounts.

Similar trends aimed at real-time transactions are also observed in the B2B payments segment .

Every business has a bank account, and large companies hold many such accounts. This is a common and popular source of funds used by business partners for settlement.

The possibility of accelerated transfer of funds between accounts generates a wave of innovation and investment in banking and non-bank payment networks.

However, treasurers and managers managing cash flow of the company, above all, do not appreciate the speed of transactions. They are concerned about the guarantees of payment, because without the certainty that the funds are really available and that they can be transferred within the network within a specified period, companies will not be able to properly plan their monetary policy.

Innovations that achieve a high level of transparency, predictability and security are valued almost more than the speed of moving funds.

Banks understand this and are already analyzing the profitability of implementing systems that emphasize elements that are most important to corporate customers. All this happens simultaneously with the emergence of payment methods, allowing to achieve more specific and rapid movement of funds at a lower transaction cost.

Based on the same trends that are observed in retail payments, innovators use a wide distribution of banking business accounts and create solutions that meet the requirements of corporate customers.

Scheme " one-day ACH»Uses existing payment channels to complete the transfer of funds within one day. This is achieved through a discussion of the possibilities of increasing the periods of settlement. Innovators combine existing payment systems, new technologies, and risk assessment and fraud models to make instant funding a reality. Some of them follow a complex path of integration with the standards of sending payment messages and financial institutions, saving their corporate clients from such work.

Dispelling uncertainty

Confidence creates trust that can be a catalyst for change.

Scientists have proven that most people dislike uncertainty. Sometimes this feeling is so strong that it leads to loss of strength and motivation. Uncertainty loves units that love risk and everything unknown. But most of us are not. In everyday life, we love stability.

To overcome difficulties, people often rely on the help of other, familiar people. Their experience, of course, greatly influences the final assessment of the situation.

I have been writing and talking about the importance of certainty and payment innovation for the past five years. This is an idea that many innovators have bypassed, and the major players, who have been its source for years, underestimate the importance of transparency and stability of the result.

Innovators often believe that most people will overcome the fear of the unknown for the sake of their product, because the proposed approach to doing business is something new, high-tech and allowing for an improved result.

But this is true only if the “improved result” is predictable.

Of course, there will always be people willing to take advantage of uncertainty as a motivation to try something new.

However, the more innovation a particular experience brings, the less likely it is that business representatives and consumers will want to experience it. The desire to try a product arises only if this experience is associated with a proven brand that has already gained fame as a supplier of reliable and safe solutions.

It is for this reason that people like to use the Amazon voice system with the built-in audio assistant Alexa. They trust the Amazon brand because it provides a solid commercial experience.

That is why consumers pay for purchases in the store with a plastic card, even if they hold a mobile wallet in the second hand.

And that is why more than half of B2B payments in the United States are still made with paper checks.

And that is why the owner of a small workshop and the treasurer of a large financial corporation treat the payment innovations in the same way: “Provide me with a guarantee of results, and only then will I use your service.”


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