Business-to-consumer payouts are attracting a small but growing cadre of payment processors and fintechs eager to exploit a multi-trillion-dollar market where checks and automated clearing house direct deposits have a heavy presence, according to a new report.
The report from Aite Group LLC analysts Talie Baker and Erika Baumann identifies more than 15 vendors serving the B2C market. These companies’ clients include insurance companies, merchants, governmental entities and other organizations looking to streamline their payments to consumers—everything from insurance-claim disbursements to gig-economy worker payments to retailers’ loyalty payouts to customers, among others.
Boston-based Aite estimated the size of this payout market in the United States at $10.7 trillion in 2018 on 3.5 billion transactions. The dollar value of disbursements to consumers over age 18 grew 78% from 2014-18. Based on a 2018 survey of 2,538 Americans, Aite estimated that 68% of consumers received funds disbursements via direct deposit, and 49% via check, with most electronic alternatives far behind.
“B2C disbursements have traditionally been made via mailed checks and more recently have been made using ACH,” the new report says. “Checks are a high-cost payments instrument, requiring labor-intensive processes to print, mail, track, and reconcile. ACH is a lower-cost alternative to checks, but payers are required to gather and maintain the payee’s sensitive financial information, subjecting the business to fraud. In addition, ACH is not always fast enough for today’s on-demand consumer.”
Indeed, vendors pursuing the market in 2020 are offering variations of real-time or near-real-time payment services, including the push-payment services Visa Direct and Mastercard Send from Visa Inc. and Mastercard Inc., respectively. Other B2C options include everything from the Real Time Payments (RTP) service from The Clearing House Payments Co. to Zelle from bank-owned Early Warning Services LLC, and PayPal Holdings Inc, according to an article on the B2C market in the upcoming February edition of Digital Transactions magazine.
The Aite report says players in the space also include ACI Worldwide, Checkbook.io, Dwolla, bank processor Fiserv/First Data and its rival Fidelity National Information Services (FIS), Finix, Ingo Money, Marqeta, Sipree, Stripe, TabaPay, TransCard, Vela Payments, and Western Union. There’s also room for emerging niche providers such as Alacriti, according to Aite.
Banks, of course, also are key players in the B2C payments realm. The Bancorp Inc., parent company of The Bancorp Bank, on Tuesday reported Naples, Fla.-based ACI Worldwide will use its Direct Rapid Funds platform for corporate disbursements. The platform uses Visa Direct for the real-time payments capability. Wilmington, Del.-based The Bancorp says it currently facilitates more than 35 million faster-payment transactions each month.