Last week Stripe launched their latest feature: Instant Payouts.
Stripe is a tech company that is on a mission to make digital payments as simple as possible for all businesses. It started in 2010 when the brothers Collison founded /dev/payments. After some misspellings and confusion by outsiders the competitor of PayPal renamed itself to Stripe; now worth $5B.
This new feature.
Instant Payouts is a service that allows marketplaces to send payments to sellers or service providers within minutes. This way, marketplaces can give service providers a much better product experience by sending them their earnings faster than ever – and greater flexibility and control over when they get paid.
For several months Stripe has been testing this feature with platforms of all sizes, of which Lyft is the most well-known. In Lyft’s case, the new technology enables drivers to deposit earnings in the bank the second they finish a shift, while with traditional banks it can take several days to transfer the money. Since using the beta, Lyft has already sent over $500m to drivers this way.
So what makes this faster?
Most of today’s payment services use the automated clearing house network (ACH) to transfer money. This is quite an old-fashioned system where the money is transferred to Bank #1 after which the batch is electronically sorted by the clearing house (the middle man), and then sent to Bank #2.
Instant Payments skips the middle man and quickly sends the money from Bank #1 to Bank #2 using the debit card networks of Visa and MasterCard.
But ACH is fighting back.
In the hope of keeping up with the fast-paced developments in the FinTech-industry, ACH is now giving its customers the option of same-day processing to move payments faster. What makes this possible is adding an extra submission deadline for the payments, which makes 2 a day (morning and afternoon).
This sounds nice, but choosing this new option has (as you could almost have expected) a fee accompanied with it.
Banks and other financial institutions better be ready because companies like Stripe are coming in hard. Adding one extra admission deadline to your system will not cut it.
Sources:
https://en.wikipedia.org/wiki/Stripe_(company)
https://stripe.com/blog/instant-payouts-for-marketplaces
http://www.recode.net/2016/9/15/12927472/lyft-express-pay-500-million-cash-out-drivers
https://www.depositaccounts.com/blog/difference-between-wire-transfer-and-ach.html
http://bankinnovation.net/2016/09/mastercard-send-is-now-powering-stripe-instant-payout/
https://www.nacha.org/rules/same-day-ach-moving-payments-faster
