Instant Payouts for SaaS Platforms and MarketPlace Payments

 

1. Push to debit card
2. Real-time Payments (RTP)
3. Same-day ACH
4. Virtual Credit Cards
5. Remote check printing

  a. Push to debit card Both MasterCard and Visa offer push to card payments. For all of our payout examples we will use the example of a home service platform that connects independent contractors with homeowners. The platform sources the customer and takes payment for the completed job. The platform could say to their independent contractor “You can be paid in 2-4 days, or we can move money now to your debit card”.  There is a cost to the platform to do this. As an example we will use $1.00. The platform could say “you can receive your $ within 15 minutes for an added fee”. That fee could be $2 or like QuickBooks, 1%. On a $1000 job the platform could see $9 in revenue. You may be thinking, how does the money flow? Essentially in all of our Instant Payout schemes payout risk must be mitigated. Typically if the platform want to push out $1000 or $991 in our example, they will pre-fund an escrow-like account with their payments partner. This covers the risk exposure of the payment processor pushing money out and not being to collect from the platform. There are are other risk mitigation measures that we will address in the risk section.   b. Real-Time Payments Real-time payments (RTP) are payments that are initiated and settled nearly instantaneously. A real-time payments rail is the digital infrastructure that facilitates real-time payments. Ideally, real-time payment networks provide 24x7x365 access, which means they are always online to process transfers.  This includes weekends and holidays. In the United States, the most prominent example of a real-time payments network is The Clearing House’s RTP network. FedNow, the Federal Reserve’s anticipated real-time solution, will also fall under the definition of a real-time network. The Federal Reserve is projecting to launch FedNow in 2023. There are a number of different payment “rails”. We have ACH, credit card and now real-time payments. The advantage of real-time payments are that they are super fast and funds are know to be good and the transaction is final. In addition rich data can be passed and captured for sophisticated reconciliation. The downside? Not all banks participate in the RTP network. Here is a list of participating banks. Depending on geography the coverage rates can vary. Estimates range in the 60% range. What happens when you try and use the RTP and one of the banks is not in network? Typically, the fall back is same-day ACH.   c. Same-Day ACH ACH payments typically take 2-4 days to settle. Same-day ACH uses the ACH rail, but the bank involved in the transaction must comply with funding the receiving bank account. The caveat is that the origination of all Same Day ACH files, transactions and batches must be received by 11 a.m. CT to process as a Same Day.  The receiver’s bank posts credits to their customers bank multiple times per day. Again your payments partner will likely force the platform to pre-fund and escrow account.   d. Virtual Credit Card With a  Virtual Credit Card (VCC), the payee is sent a 16 digit credit card#,expiration date and cvv code. That card can then be used like a physical card. The receiver could in turn fund an ewallet, use on Amazon etc.   e. Remote Check Printing In this case the payee is emailed an electronic check. They can then print and deposit this check at their bank or remotely. There is also the option to physically print and mail a check and of course standard ACH transactions.

  On-demand access to money for recipients –earnings can be sent to an eligible card within minutes. 24/7 availability–and this includes weekends and holidays.   Increased loyalty –whether it’s a 1099 contractor, gig worker, or marketplace seller, the fact they know they’ll get instant payments will boost loyalty and adoption of your platform. Ride share company Lyft started offering instant payouts in 2015, and by 2018, 58% of its drivers had opted to receive their payouts that way. Increased productivity –the thought of receiving payment as soon as the job is completed is definitely a great motivator! Instant funds from sales -As well as being advantageous for workers or sellers, Merchants can benefit from instant payouts. When you make a sale, the money can be sent immediately to a connected account debit card, bank account or digital wallet, simplifying accounts payable.  

  Using Instant Payouts to Capture Market Share There are many industries where offering instant payouts was proven to increase platform participate. Uber, Grab, DoorDash are justa few that saw dramatic improvements.  Grab was able to dominate the ride sharing market partly by paying drivers in real-time, while competitors paid every few days. Let’s consider a case where a Home Services company connects customers with professionals such as plumbers, electricians, and locksmiths. Instant Payouts as a Recurring Revenue Driver QuickBooks charges 1%, Square? 1.5%. Starting to get the picture? There is SIGNIFICANT revenue potential.

  The vast majority of the time your platform or business will need to pre-fund an escrow-like  bank account that you Instant Payment solution partner has access to. If you were asked to send your money to another entity and you were relying on being paid back those funds you can see how that could make you nervous. What if you were not able to get those funds you had irrevocably paid out? It happens and when it does it creates financial loss. This is why pre-funding is the preferred method of risk mitigation. There are other potential solutions eg using a letter of credit. A public or very strong company may be offered additional options. This means you need to comfortable and capable of pre-funding an account for your disbursements needs.