Identifying and solving key aspects of global payments friction via the 2022 Global Payment Survey
Digital Wallets and Mass Payments: A Perfect Fit
Digital wallets provide both senders and recipients of mass payments with big benefits including lower costs, faster delivery and more choice.
Replacing outdated manual practices with automated solutions saves a tremendous amount of time and expense, but it often spawns new terms to describe what is essentially the same process. Some might suggest that’s the case for mass payments.
As defined by Investopedia, mass payments are “a method of paying multiple recipients online simultaneously.” Sounds pretty familiar to any payables professional. Accounts payable departments have been sending payments simultaneously to multiple recipients for long before the internet. However, the operative term to distinguish mass payments from its predecessors is neither mass nor payments; it’s online.
Moving payments online opens a bevy of benefits for payers and payees, creating new opportunities for software and service providers to provide payment services as an integrated component of their software or service.
Mass Payer Benefits
Organizations can lower their cost of sending payments through the digital transformation of their business processes using APIs to automate payment-related processes.
Beyond traditional payroll and accounts payables, other mass payment batch processing use cases are growing rapidly, including:
- Partner and customer rebates
- Partner employee rewards
- Survey incentives
- Wellness programs
- Customer loyalty
- Research & clinical trial participation
- Affiliate commissions
- Contractor payments
- Insurance claims
- Development funds (MDF/BDF)
Mass payments can also save senders or payment service providers time as recipients can provide their personal and/or company information and tax IDs as needed to the payments platform processor — rather than to the sender.
Shifting to self-serve processes empowers payees, reduces costs and frees up resources that redirect to core business activities. Managing that payee Personally Identifiable Information (PII) and Anti-Money Laundering (AML) compliance and tax reporting can be outsourced far more cost-effectively using a payments platform processor rather than traditional financial institutions.
Nowhere are savings as significant as when it comes to making cross-border payments, which traditionally incur significant wire transfer and foreign exchange fees plus the fees for paperwork associated with doing business with financial institutions in many countries.
Payments may be sent to payees in different countries, in foreign currencies, with a choice of options for recipients in how they receive the funds. In this way, mass payments allow businesses to reap the potential benefits of expanding the scope of their customers and vendors worldwide without the need for an investment in accounts payable.
Mass Payee Benefits
Moving mass payments online shifts the payment model from sender-centric to receiver-centric. Instead of the sender of the payment determining the payment method or offering a limited number of payment options, the recipient can choose how to get paid and exercise greater control over the payment process.
They can then transfer the money to their bank account, receive it on a payment card, or use it to make online purchases or order digital gift cards, or whatever options the payments platform provider offers.
Speed of payment is also radically improved. Instead of waiting to receive a check in the mail, recipients receive a link via email or mobile phone to claim their payment or access their balance directly via the payments platform portal to their secure digital wallet. But that’s only a first step in accelerating payment. Digital wallets are central to making the promise of speedy payment a reality.
Using Digital Wallets
Payer and payee accounts are provisioned with as many currency-specific wallets as they require, enabling intra-account currency conversions using multi-currency digital wallets. This allows payments to be made from funds in the payer’s preferred currency and ultimately received in the payee’s preferred currency. Payments are made instantly to the recipient’s digital wallet (account) — across borders and time zones. Either party can make intra-account wallet-to-wallet currency exchanges.
This provides payees with immediate access to their funds in their preferred currency with the ability to tap the funds immediately using digital payment options like a virtual Visa or transferring the funds to their bank account. They can also send funds to other users on the digital wallet platform.
Adding this level of flexibility to mass payment distribution using digital wallets to bypass the traditional bottlenecks and cost-drivers associated with traditional intermediaries both simplifies the process and reduces the cost for cross-border payments. And, importantly, it allows for instant wallet-to-wallet payment from payer to payee.