When it comes to faster payments, merchants don’t want to be left out, and that’s creating a big opportunity for payments processors and other merchant acquirers.
Indeed, as the payments industry shifts toward real-time and near-real-time money movement, processors can cash in on the value of getting good funds into merchants’ accounts instantly, merchant-acquirer executives say. “Especially in the small- and medium-size business world, they’re willing to pay a premium for it,” says Henry Helgeson, head of integrated solutions at Columbus, Ga.-based Total System Services Inc. (TSYS).
Paysafe North America, the Shenandoah, Texas-based unit of London-based Paysafe Holdings U.K. Ltd., has come to the same conclusion. Last month, it launched a program called “Accelerated Funding” that includes options from next-day to same-day to “Express” funding. The last choice delivers funds within hours to a linked debit card. “There are certain verticals where merchants really need the funding,” says Todd Linden, chief executive.
He agrees with Helgeson that demand is coming largely from small and medium-size merchants. Restaurants and bars, in particular, respond well to the idea of getting their funds for Saturday and Sunday sales without having to wait until Monday, he says.
Both Helgeson and Linden spoke to Digital Transactions News during this week’s Money 20/20 trade show in Las Vegas.
Faster funds can command a premium because they incur higher risk. “We’re funding the merchant before we get paid,” says Linden. “So we charge more.”
Helgeson points out that “there’s very little recourse” once the funds are disbursed. At the same time, there’s only a matter of hours to vet transactions for fraud. “So there has to be a premium,” he adds.
An example of what the market will bear for faster funding is Square Inc.’s 3-year-old Instant Deposit feature, which delivers funds to merchants within seconds for a fee of 1% of the funding amount on top of ordinary transaction fees.
The plan at TSYS is to use its ProPay unit to manage faster funding, Helgeson says. TSYS acquired ProPay, an early entrant in what is now a crowded market for payment facilitators, in 2012. The pipes will come from Visa Inc. in the form of Visa Direct, a service that transfers money in real time via an original credit transaction, or OCT. The OCT was designed to deliver quick refunds to customers when they return merchandise to stores, but lately it has been harnessed for fast transfers to businesses, as well.
For its real-time funding service, Paysafe is relying on Alpharetta, Ga.-based Ingo Money Inc., whose technology enables push payments between accounts. Linden sees delivering faster funding as needed to help get in step with a global trend toward real-time payments.
“It’s something we need to do, and we’re catching up with the rest of the world,” he says. “It seems only fair to give the merchant his money.”