News Every Day | 28 March 2023, 11:02

Digital Disbursements and Payouts Chip Away at Killing the Check

With paper check fraud reportedly doubling in 2022, the need for digital disbursement options has never been more urgent — or more desired by consumers, many of whom in key demographic groups like Gen Z have never even possessed a paper checkbook.

Because of their historic ubiquity, however, checks continue to be a default for many companies making small disbursements at scale to consumers. The pandemic has changed that and made the provision of digital disbursements and P2P payments commonplace today, although the uptake of these systems is far from universal.

Acknowledging the paper check fraud spike of 2022, Bank of America (BofA) Head of Global Digital Disbursements Allison Shonerd told PYMNTS, “From the consumer’s perspective, we see a real skyrocketing adoption of digital behaviors in the peer-to-peer space. That’s creating more of an expectation that those same solutions are going to translate when receiving a payment from a business.”

Noting there has been a shift in the power consumers have in impacting business payment strategies, she said more businesses are looking to transform their processes at a time when consumers are demanding fast and frictionless near-real-time payments from companies.

“What that means for us at Bank of America is that we’re focused on delivering solutions that are emphasizing speed, that operate on a 24-by-7 basis, and where we can also layer in some of the additional value add services” like identity validation and payment choice.

BofA took a major step toward that goal with the 2021 launch of Recipient Select, a digital portal for both domestic U.S. and global payouts to over 140 countries bundling Zelle, ACH, PayPal, Real-Time Payments and Pay to Card solutions to offer users choice and optionality.

Shonerd said there isn’t a one-size-fits-all solution to meet the needs and preferences of every consumer across every demographic. But with Recipient Select, “I think what we’ve seen is that from the business’s perspective, they’re excited to be able to offer as many payment types as possible through a single integration.”

Consumers especially are taking to alias-based methods like Zelle and PayPal that only require an email address or a phone number — and an app or bank account — to accept those payments. For businesses, she added, “More often than not, we see our clients looking to simply switch on all of the payment types that we can make available for them to offer their consumer payees.”

Switching on Digital Disbursements

Looking at where this digital uptake is on a slower roll to ubiquity, Shonerd pointed to use cases where those making smaller payments at scale are still waking up to newer digital options.

“A lot of these solutions didn’t even exist five to 10 years ago,” she said. “When we look at Zelle, for example, it didn’t exist 10 years ago, and today it’s reached a level where we’ve seen over $2.3 billion transferred by Zelle users in 2021.”

She added, “I don’t have visibility into the whole industry, but looking at our digital disbursement solution, which we enabled around 2017, we’ve seen consistent double-digit growth year-over-year,” with select industries in the lead.

A great example of where these capabilities are making an impact is in verticals like insurance that perform millions of disbursements annually and are seeking a balance between great customer experience and realizing the business efficiencies and cost savings digital options offer.

Shonerd said, “There’s tremendous value in being able to pay a claim quickly, efficiently, at a moment’s notice, at night or on the weekend. Also in the not-for-profit space, things like disaster relief and emergency aid-related payments. For somebody impacted by the California wildfires, for example, to be able to receive a relief payment in near-real-time has tremendous value.”

It’s also bringing positive change to the refund space, which is rife with one-time, nonrecurring business payments to individuals. She specifically called out healthcare refunds and student refunds, saying, “We’ve really seen a bit of an uptick there.”

Getting Down to Cases

Drilling down into use cases where Bank of America sees these digital disbursement and payout options having a major impact in the short term, healthcare comes up as primed for this change.

Shonerd said BofA healthcare clients are rightly obsessed with customer experience, yet many have clung to paper checks even after the pandemic digital shift, and they realize it’s an issue.

Saying a great deal of work has gone into taking friction out of the healthcare experience through advances in online scheduling and telemedicine, she noted that when a refund is due to a patient, it often still ends up with the issuance of a paper check.

“The challenge healthcare organizations face when trying to go digital is the fact that they have an extraordinarily diverse set of payees,” she said. “Those patients range in age from 16 to 100, sit in varied geographies, and have tremendously different preferences.”

That’s where the optionality of a solution like Recipient Select is making a difference in patient experience at scale by killing the check without annoying the patient-payee.

Cross-border is another area where payors are trying to remove impediments to seamless money mobility, and that figures into BofA’s plans prominently.

“Our clients are looking to meet consumers where they are in this digital landscape. We’re digging into ways that we can support that by adding new digital payment methods,” she said.

Citing a stat that nearly 4.5 billion consumers are expected to use a digital wallet in 2023, for example, she said speed and digital ease are the expectation now, whether repaying a friend for dinner or making a cross-border transfer, which can be subject to fees and deductions.

“Consumers and our clients are looking to move away from that,” she said. “A lot of time is being put into building out digital wallet connectivity, expanding the options that we can offer to clients to help reach consumers in wallets and local clearing systems all around the world.”