The topic of faster payments has won plenty of publicity in recent years, but less celebrated is the mundane business of crediting merchant accounts. That’s getting faster, too, and the latest development is a service called Funds Now, which PayPal Holdings Inc. announced Tuesday. With this service, online merchants in good standing can expect their money “within seconds,” PayPal says.
Funds Now works by eliminating the typical holds, reserves, and other delays that are customary in merchant processing but are also the bane of small businesses. “In the world of payments, funding delays of seven to 21 days for small businesses have been far too common,” says Bill Ready, executive vice president and chief operating officer at the San Jose, Calif.-based company, in a blog post about the program. Ready says the program has already been offered to more than 1 million small businesses, around 5% of PayPal’s total merchant base. As of this week, Ready says, Funds Now is becoming available to “select” clients in the United Kingdom and Australia, as well as the United States.
There’s no add-on fee for the quicker funding, but merchants new to PayPal will have to wait a while to become eligible. Businesses must have at least six months of history with PayPal. They must also show “confirmed” account information to make sure they’re legitimate, and must have a track record of successful payment flows to PayPal. Also, once granted, faster funding may be “withdrawn, suspended, or modified at PayPal’s discretion,” according to the PayPal page about the new service.
Funds Now emerges as competition in the small-business sector has grown more intense, with rivalry not just from newly emerging payment providers but also pressure in in-store processing from integrated-payment specialists and newer financial-technology firms like Square Inc.
But while Funds Now applies to online merchants, PayPal has shown itself willing to open its wallet to expand its merchant-processing business overall. Earlier this year, it shelled out $2.2 billion to buy Europe’s iZettle, a Square-like point-of-sale vendor, and officials indicated in July the company has set aside between $1 billion and $3 billion for more acquisitions.