PaymentsJournal
SUBSCRIBE
  • Analysts Coverage
  • Truth In Data
  • Podcasts
  • Videos
  • Industry Opinions
  • News
  • Resources
No Result
View All Result
PaymentsJournal
  • Analysts Coverage
  • Truth In Data
  • Podcasts
  • Videos
  • Industry Opinions
  • News
  • Resources
No Result
View All Result
PaymentsJournal
No Result
View All Result

Real-Time Payments Does Not Mean Pay Day Will Happen Sooner

Sarah Grotta by Sarah Grotta
August 29, 2019
in Analysts Coverage, Faster Payments
0
Real Time Payments Does Not Mean Pay Day Will Happen Sooner

Real Time Payments Does Not Mean Pay Day Will Happen Sooner

7
SHARES
0
VIEWS
Share on FacebookShare on TwitterShare on LinkedIn

In all the exciting news about the development of real-time and faster payments, a message is being broadcasted that the current means of delivering payments to consumers, particularly payroll deposits, by check or ACH direct deposit are too slow.

Critics argue that the slowness of these payment methods has a negative impact on those who are living paycheck to paycheck. While this is a very real problem that some consumers face, the advent of real-time and faster payments does not mean that payday will magically come earlier or that checks will clear in an instant. An employee paid via ACH direct deposit every other Friday will still get paid every other Friday, even if that deposit was made through a real time payment transaction.

As Jane Larimer, president and CEO of NACHA, wrote in the American Banker:

“Direct deposit via the automated clearing house (ACH) network is the way in which nearly 93% of Americans get paid, according to a 2018 American Payroll Association survey.

Most importantly, by using direct deposit, workers get the money in their accounts at the opening of business on payday, without having to wait for a paycheck to clear. For example, an employee with a payday on Aug. 30 using direct deposit will have funds available for withdrawal or to cover payments at the start of that day, prior to Labor Day holiday weekend.

We are starting to see a number of general purpose reloadable prepaid card providers offer consumers access to their payroll direct deposit two days early and there are solutions available through providers like FlexWage and DailyPay that offer options for employees of participating employers to receive a portion of their earned wages before pay day, but these are unique programs.

Will real-time and faster payments clear paper payroll checks more quickly for the 7% of American getting paid that way? Quite doubtful. That would require taking check images once they are deposited and sending them through a real-time network. It would also require investment in a new process for paper checks, which would be a poor investment given the decline in check use.

Will employers stop writing payroll checks in favor of a real-time disbursement to their employees?  Perhaps, but businesses have had a more efficient and less expensive alternative to checks for the last 40 years: ACH. The 2015 AFP payment study concluded that the median cost of writing a check for a business was $3.00. The median cost of an ACH transaction to a business was $.57 including both internal and external costs.

If businesses haven’t make the switch to ACH yet, what will compel them to use a real-time or faster payment rail? While faster and real-time payments open up a new world of better and more efficient transactions, let’s be clear about what it will and will not accomplish.

Overview by Sarah Grotta, Director, Debit and Alternative Products Advisory Service at Mercator Advisory Group

Tags: ACHFaster PaymentsNACHAReal Time PaymentsSame-day ACHThe Clearing House
7
SHARES
0
VIEWS
Share on FacebookShare on TwitterShare on LinkedIn

    Analyst Coverage, Payments Data, and News Delivered Daily

    Sign up for the PaymentsJournal Newsletter to get exclusive insight and data from Mercator Advisory Group analysts and industry professionals.

    Must Reads

    live shopping, ebay

    Q&A: eBay Exec on Live Shopping and the Future of Payments

    March 24, 2023
    AI and Biometrics in Regulatory Compliance in Finance

    The Importance of AI and Biometrics in Regulatory Compliance in Finance

    March 23, 2023
    Everyone Benefits from the Real-Time Payment Networks  

    Everyone Benefits from the Real-Time Payment Networks  

    March 22, 2023
    commercial payments

    Optimizing Commercial Payments in the Digital Age

    March 21, 2023
    cross-border payments

    Cross-Border Payments: Fighting
    E-Commerce Fraud Using Data

    March 20, 2023
    fraud, ChatGPT-4

    How to Fight Fraud While Still Enabling a Great Online Customer Experience

    March 17, 2023
    RTP

    Financial Institutions Without an RTP Strategy Risk Being Left Behind

    March 16, 2023
    visa chargeback

    New Visa Chargeback Guidelines Will Be a Game Changer

    March 15, 2023

    Linkedin-in Twitter

    Advertise With Us | About Us | Terms of Use | Privacy Policy | Subscribe
    ©2023 PaymentsJournal.com

    • Analysts Coverage
    • Truth In Data
    • Podcasts
    • Videos
    Menu
    • Analysts Coverage
    • Truth In Data
    • Podcasts
    • Videos
    • Industry Opinions
    • Recent News
    • Resources
    Menu
    • Industry Opinions
    • Recent News
    • Resources
    • Analysts Coverage
    • Truth In Data
    • Podcasts
    • Industry Opinions
    • Faster Payments
    • News
    • Jobs
    • Events
    No Result
    View All Result

      Register to download the Payoneer eBook: