Meeting Unprecedented Times with Faster Payments Disbursements

In a year where we’ve seen the emergence of the COVID-19 pandemic, the raging wildfires in California, a hurricane season so active we’ve exhausted the alphabet, and more, “unprecedented” has become an all too familiar term. And these incomparable times have had considerable impact on the American people, particularly from a financial perspective. 

Why? Because financial assistance to support those in need in times of disaster is not as easy to secure as it should be. Take for instance the COVID-19 pandemic assistance that was issued back in April. As of August, as many as 35 million people were still waiting on those payments. In times of disaster, having access to funds when you need them most is paramount.

We just finished National Preparedness Month, and that raises the question of how prepared are we today to respond to the immediate needs emergencies bring? Certainly, faster payments exist today, but our infrastructure falls back on slower payments processing as a default. With the number of U.S. consumers receiving more than one disbursement over the past 12 months increasing by more than 52 percent over 2019, a discussion around the need for timely disaster disbursement payments seems appropriate. And when you factor in the reality that disbursement payments have historically been slow – in 2017, over half of disbursements took 2 to 14 days to be received - a focus on this important topic might even be overdue.   

Today, we live in a digital-first, immediate fulfillment world. Waiting even two days for funds, particularly in a disaster when a person may have lost everything, is too long. Immediate access to money can allow those impacted to quickly begin putting their lives back together.

On the positive side, new developments show a gradual shift to a new approach. The entities providing aid are working to get money into the hands of victims as quickly as possible, and are leveraging new and emerging products and solutions to do so. For example, the Red Cross has expanded its payment delivery options. Today, victims can have funds delivered faster through EFT, PayPal, MasterCard Send, Zelle or Walmart Direct2Cash. And Americans increasingly choose these newer, faster methods for funds receipt. In 2017, only 11 percent of consumers indicated they received an instant disbursement payment. By the end of 2019, that number had increased to 42 percent. In fact, consumers appear to prefer these faster payout options. Sixty-five percent of U.S. consumers indicate it is important to be able to receive instant payments from businesses or government agencies that owe them money, and 70 percent report that they would select an instant payment option for disbursements if it were available. 

While there is clear progress on the faster disbursements front, more work remains. In most cases, legacy payment mechanisms still dominate as the default primary means to disburse funds to consumers, and their expectations are shifting. On average, U.S. consumers receive 18 disbursements annually, and in today’s immediate gratification society, it won’t be long until they are questioning why they need to wait for those payments. With disbursements a significant $4.6 trillion industry, payments professionals need to take a hard look at ways to improve their speed, particularly in disaster-related instances, precisely because consumers and businesses will demand it. vi

At the FPC, we recognize the value faster payments can bring to disbursement payments. Particularly in times of need, fast disbursements can make a world of difference to those trying to manage extreme circumstances. While disbursements serve as one useful application of faster payments, there are other countless use cases faster payments can solve for. 

Knowing this, the FPC continues to work to advance faster payments through our many efforts – Work Groups, research, education initiatives, and more. And we’ll continue to work so that we can meet the needs of Americans in these unprecedented times and into the future.