Instant payments: What are they and how can I offer them?

According to the Federal Reserve, 74% of consumers used faster or instant payment technology in 2023, a 32% increase from the previous year. With faster access to their funds, expectations have changed, as well. Almost a quarter of consumers find slower payment methods challenging and expect faster transfers. 

Software companies that want to compete in a crowded market should consider how instant payments can help them better meet these customer needs and keep users around for the long run. 

If you’re thinking about adding instant payment capabilities to your product or service, here’s what you should know to make an informed decision and give your users the best experience possible.  

Benefits of instant payments for software companies and their users

Instant payment technology can allow your users to conduct peer-to-peer transactions or payments-to-self in real-time, directly to their debit cards. But they also can also be used to streamline paycheck deposits, online account funding, expense management and subscription payments. 

For example, instant payments can be used to give freelancers instant payouts for jobs completed or reward customers through a loyalty program. They’re often used to give owner-operator trucking companies easy access to funds rather than waiting to be reimbursed for expenses.

In a world where consumers expect things to happen instantly, it’s a game-changer that can earn you loyalty from even hard-to-please users. 

Fast access to a consumer’s own cash 

Instant payments decrease the time it takes for consumers to access and use the money they’ve already earned. The Federal Reserve Bank of Atlanta says people want “real-time information and fast access” to their own cash. 

Instant payments let people access and use their funds within minutes, not days. Whether they are funding an online account, receiving a paycheck, sending money to a debit card, or making a transfer to another user, this functionality skips the lengthy waiting periods that occur when moving money to or from bank accounts.

Better experience for users

Companies that want to boost their user base or compete with other tech companies can enhance their product or service offering with instant payments. Since instant payment fees are typically well below the cost of cash advances, overdraft fees or over-limit fees on credit cards, they give customers access to their own money at a lower cost than other options.

This empowers users, like freelancers on a marketplace platform, to do more with the cash they’ve already earned from jobs. It also gives you a better way to onboard new users and create the seamless customer experience consumers have come to expect from a digital product. 

Opportunity for platforms to generate new revenue

Instant payments add another layer of profitability for companies who offer them. Not only are you getting a way to process payments within the platform, instant payments can help reduce processing fees and even capture merchant fees. 

It’s a win-win with a chance to profit. Help users who need access to fast cash and are more than willing to pay for the benefit — and create a new revenue stream for your business. 

What are the payment rail options for instant payments? 

The payment rail infrastructure and networks, which include well-known players like FedNow and ACH, move money between users, banks and businesses. Payment rails refer to a technology that is different from a payment gateway, which transmits payment data from the customer to the processor through a software platform. 

While it may have been complicated to offer more than one payment rail in the past, new developments in embedded finance have given technology companies more choice.

Astra’s instant payments API works with all of the previously mentioned payment rails for a completely embedded tool that integrates into your existing offering. It won’t send the customer to another website or require an additional app. It’s a completely plug-and-play approach. 

To decide which rails to use, consider the pros, cons and how they may fit into your user’s overall digital experience. 

ACH

Automated Clearing House (ACH) transfers are well-known for employee paychecks and other regular bank deposits. This payment rail is managed by the National Automated Clearinghouse Association (NACHA) and moves money electronically between banks. Since transactions are generally batched, they can take a day or more to process and credit to the consumer’s account. 

Pros: ACH, which is ideal for recurring billing, is much more affordable than wire transfers. 

Cons: Banks may limit transaction amounts, such as $1,000 per day or $10,000 per month. It’s only available in the U.S. for U.S.-based transactions. 

Bottom line: ACH may work best for paying U.S. users smaller amounts when they don’t care how long the money takes to clear. When instant transfers aren’t an option, Astra can help decrease ACH time with accelerated transfer technology. 

RTP

The Real-Time Payments Network (RTP®) is truly instant and can allow payments to be sent at any time of the day or night, 365 days of the year. Launched by The Clearing House (TCH), it moves money between banks so consumers get real-time access to funds. 

Pros: They are very affordable and cost much less than wire transfers while being easier to trace than some other payment options. 

Cons: Not all banks offer it, and it’s only available for U.S. banks and merchants at this time. It only works for push transactions (payments) and not pulls; transactions are irreversible. 

Bottom line: While lightning-fast, RTP won’t work for every user, especially those with smaller banks or who live outside the U.S. For those customers who prefer it, Astra can integrate the option into your platform so it’s affordable for them and convenient for you. 

FedNow

FedNow is the government version of instant payments launched by the U.S. Federal Reserve in 2023. Over 700 entities currently use the 24/7 365 service to issue real-time payments. 

Pros: FedNow charges lower transaction fees than card transfers and has the trusted backing of the U.S. government. 

Cons: Since it’s very new, participation is limited, with few banks added at this time. It’s only available for U.S.-based push transactions, and payments can’t be reversed. 

Bottom line: Despite FedNow’s push for widespread adoption, it’s still in early days. However, Astra can integrate it into your payments workflow so that when users are ready, they have it as another option for real-time access to cash. 

Mastercard Send and Visa Direct

Mastercard Send and Visa Direct use their secure network technology to receive, authenticate and process payments – usually within 30 minutes. 

Pros: They offer Visa and Mastercard card recognition and have earned customer trust. Payments are guaranteed in most circumstances and may be reversed. The global network extends beyond just U.S. banks and consumers, reaching billions of users worldwide. 

Cons: Fees cost more than other instant transfer technologies and may be subject to fraud and chargebacks. 

Bottom line: As one of the few global options for instant payments, the card offerings ensure you can pay anyone, anywhere, at any time. Astra’s plug-and-play developer tools help you manage these payments and keep an eye on fees and fraud, as well. 

How to implement instant payments 

A properly implemented instant payment solution will not only delight those users who need cash quickly but it will also reduce customer churn and drive more money into your business channels through increased payment volume and optional add-on fees. 

Here’s how to make it happen.

1. Decide if instant payments are right for you

Despite consumers’ growing demand for instant payment options, not all businesses need to adopt them. Instant payments are best for those who:

• Already provide payment services to their users
• Recognize the need for faster payouts and more timely account information
• Want to offer a value-added service, possibly for additional revenue
• Find traditional payment gateways limiting

Many companies have an ideal product ready to move into the instant payments space, and partnering with Astra can make accessible funds a reality for more of their customers and users. It’s especially relevant for companies that have an existing tech stack and want plug-and-play functionality to help meet future customer demands. 

2. Choose the right payment rails and implementation partner

You could start by picking the payment rail that makes sense for your users, or you could choose an instant payment solution that covers all the bases.

Astra works with all of the payment rails discussed above to give you more options for instant payments. Because it is an embedded finance technology that gets layered onto your existing app or service, it offers significant advantages over building from scratch and can help you get to market much quicker. Astra offers your developers a simple Software Development Kit (SDK), along with Application Programming Interface (API) requests that make it easy to incorporate instant payments into your product. Set up the service with your choice of rails and begin paying users instantly through their debit cards in weeks instead of months. 

Your developers also get access to online tutorials, documentation and complete guides with all the details needed for our embedded technology to work seamlessly with your product. 

3. Set up for success

Our guide to success with instant payments can help you stay profitable. Here are the highlights for a program that works.

• Don’t charge fees on all transactions. We’ve found that this deters some customers from adopting instant transfers. 
• Set a minimum transfer amount to benefit from economies of scale. If you do accept smaller transactions, be sure to charge fees for them, even if you don’t plan on using your instant payment feature as a revenue generator.  
• Don’t set an upper limit, as instant payment requests (especially larger transactions) can be more profitable than regular payments.

Our instant payment solutions are opt-in and require only your customer’s debit card information to begin. Once verified, our technology works behind the scenes to initiate, validate and process payments so you can focus on the rest of the customer experience. 

Astra: Your instant payments partner  

Astra’s empowers innovative companies with an instant payments API that allows them to embed payments into their offerings without building the program from scratch. One example is Fold, which grew the transfer volume for its reward-based debit card by 200% in the first 60 days after launching instant payments with Astra.

With experience assisting companies in a variety of industries, Astra is poised to help you integrate fast, secure payments that keep your users coming back again and again. 

Join the instant payment revolution. Schedule a demo today to learn about the instant payment rails available to your users.