There’s a bit from “Seinfeld” way back in the 20th century that, paraphrased, goes like this: A check is like a note from your parents that states, “I don’t have any money, but if you contact these people … I’m sure they’ll stick for me. If you could just trust me this one time …”
“Seinfeld,” of course, lives on in reruns. The check lives on, too, although like the days of “Must See TV” via networks, it is receding into the distance a bit.
The paper-based conduits of payments must make way for digital, instant means.
In an interview with Karen Webster, Drew Edwards, CEO of Ingo Money, said the stage is set for instant payments to be embraced even by “old” economy firms that have traditionally relied on checks sent to consumers and received in back offices.
In fact, as noted in an upcoming Ingo Money playbook, in research performed in conjunction with PYMNTS, more than half of consumers and roughly 70 percent of microbusinesses received at least one non-government payment in the last 12 months, with roughly half of them made through “faster” methods that include instant payments. That of course, leaves half of disbursements made through legacy payment methods, cumbersome and slow as they are.
As to who’s getting instant payments and where they are getting those payments from, it’s the bridge millennials, the younger generations, right on down to Generation Z.
That may not be a huge surprise, given the fact that the younger demographic represents the first generation of connected consumers. They’ve got the devices to request, receive and send instant payments. They’ve got the disposable income, too.
And the data show that millennials and Gen Z are among those cohorts most likely to have received instant payments. Drilling down a bit, these users are getting investments and insurance — and income — through these methods. Gen Z consumers are the most likely subset of all to have received an instant disbursement, with 17 percent of (non-government payment) recipients having received at least one such payment in the past year, followed by 15.6 percent of millennials. Only a single-digit percentage of baby boomers could say the same.
And with 25.8 percent of millennials getting insurance disbursements and 26.7 percent of Gen Z getting the same, the writing is on the wall for the “smokestack” companies — chief among them the insurance giants and others who have traditionally cut paper checks.
Better get with the (digital) program.
These budding, tech-savvy consumers — in disproportionate numbers, according to the stats — are selecting digitally-native companies that have digital systems in place to enable instant payments and offer that option as part of a digital “package.”
“A consumer who goes to one of those app-based insurance programs is going to expect an instant payment,” noted Edwards.
And for companies — no matter the vertical — it can be imperative to get the attention, the top of mind and share of wallet with these younger demographics. After all, they are at the relatively early stage of their relationships with brands and companies, making decisions about investment and insurance products that may be part of their financial lives for decades.
The time is ripe for an overhaul of some of these smokestack verticals, as FinTech startups are already making inroads. In one example, Tim Bixby, Chief Financial Officer of Lemonade, told PYMNTS that the firm (which also features instant disbursements) has been able to build an insurance company from the ground up, sidestepping legacy workflows and outdated back-office functions and paper checks.
For now, at least, there seems to be a bit of a gray area surrounding instant payments — and what’s actually on offer and available.
Overall, consumers report getting 22.4 percent of their insurance and borrowing disbursements through same-day ACH and 12.1 percent from non-instant digital payments — yet the “perception gap” occurs when consumers underestimate their access to faster disbursement options.
Unless they constantly monitor their accounts, PYMNTS found, they do not exactly know how long it takes for the funds to be available once a payment has been made. The necessity is there for providers to drive awareness around use and availability of instant payment options.
Of millennials and their younger brethren, “These groups want to be able to download apps and get insurance right there without talking to an agent, and without signing papers,” said Edwards.
That same digital-first mindset, he said, will make (and is making) millennials and Gen Z look askance at checks. Checks, after all, are not part of the experience on other app-driven interactions, such as with Robinhood, PayPal and others.
“I’m probably one of the last generations that would even think about going to a bank to find a bank account, going to an insurance agent to find insurance,” said Edwards.
And Ingo’s own findings back up that sentiment, where when given the choice (by Ingo), consumers opt for checks only 8 percent of the time. That means, of course, almost all the time, they want something other than checks.
“The data to me says: The only reason they’re still getting checks is people are still sending them to them,” said Edwards. “The problem is on the sender side, not the consumer choice, not the receiver side. I mean, who the heck wants a check?”