Small and medium-sized businesses (SMEs) receive more than a third of their sales through ad hoc payments – one-off, infrequent transactions – PYMNTS research has found. In these transactions, more than 30% of payments are made late and often more than a month late.
SMEs have traditionally received payments via paper checks sent by post, due to agreements and a lack of payment choices. Today, however, SMEs, micro-businesses and consumers are less patient, having experienced faster turnaround times while doing more business online during the pandemic.
In fact, 60% of consumers and microenterprises see instant payments as essential to payor loyalty, according to the November / December 2021 disbursement tracker, a collaboration between PYMNTS and Ingo Money.
The tide is moving towards automated payment systems
Ingo Money CEO Drew Edwards told PYMNTS that the trend is slowly moving towards replacing paper checks with automated payment systems for ad hoc payments. For buyers, this can mean greater efficiency and, ultimately, savings. These savings come not only from a less complex checkout process, but also from the ability for providers to offer discounts in exchange for instant payments.
Large buyers can also benefit from scalability and payment processing to multiple small vendors through a single system, Edwards said. A ânetwork of networksâ approach can decouple buyers and suppliers, allowing everyone to pay and get paid in the way that suits them best.
Timeliness of payments is especially important in insurance and loans, an area where PYMNTS found that 63% of consumers and 71% of micro-businesses said they would be likely to do business if offered free instant disbursements. .
Anuj Nayar, head of financial health at LendingClub, told PYMNTS that the top three things borrowers want to know are if they will get the money, when they will receive the money, and how much the loan will cost them. Whether it’s applying for a car loan or a personal loan, getting the money quickly is important for customers at all levels.
Products such as balance transfer, in which money is paid electronically directly to a creditor, help speed up the process and facilitate approvals by mitigating the risk of sending money directly to a borrower, said Nayar.
The digital trend increases the speed of disbursements
The digital trend has had an impact on the loan management process, with disbursements and repayments being processed electronically through various channels including bank accounts, e-commerce accounts and mobile wallets. This decision not only increases the speed at which funds are disbursed and collected, but also provides more opportunities for applicants to receive and repay loans in the way that best suits their needs.
This is just one example of how technological improvements in the financial sector have revolutionized the industry, and recent events surrounding the pandemic have only accelerated progress. In response to the changing expectations of an increasingly digital-savvy customer base and the need to improve efficiency and experiences, the financial industry is increasingly turning to digital solutions. Thanks to these improvements, they will be able to better retain their customers, including SMEs, VSEs and consumers.