Cash flow is the lifeblood of any business, which is why many of the most exciting innovations in payments are aimed at helping companies build better balance sheets and support healthy growth.
And the arrival of instant payments, the first domestic payment method in half a century, has given America a new and better way to pay.
Faster payments are already having an impact across the transportation industry, especially for small businesses and independent truckers who rely heavily on traditional payment mechanisms like checks and Automated Clearing House (ACH) transfers.
“For these businesses, instant payments are really about precision,” Cheryl Gertz, vice president of RTP product development at The Clearing House (TCH), told PYMNTS, explaining that in the evolving landscape of the transportation sector, the advent of instant payment systems marks a major shift in how transactions are conducted, especially among small and medium-sized businesses.
Gurtz explained that the decentralization of the transportation industry creates inherent uncertainty in cash flow. Many small businesses find it easier to manage their finances through checks, despite the inherent delays, because they offer a way to specifically control the timing of payments without the risk of overdrafts that come with poorly timed electronic payments.
Instant payments enabled by TCH's RTP network provide a solution to timing and cash flow challenges: unlike traditional methods, the RTP network operates 24/7, allowing businesses to make payments at any time, perfectly aligned with their cash flow needs.
“They're out and it's 10pm on the West Coast and they're due the next morning. Their supplier on the East Coast can pay and it's cleared within 30 seconds, so they don't have to worry about timing, they don't have to worry about bank opening hours,” Gers said.
The impact of instant payments on the transportation sector
The adoption of instant payments in the transport sector is gaining momentum, particularly in two key areas: collections and disbursement.
As Gulz highlighted, many small businesses and independents in the transport industry use factoring services to manage their cash flow, meaning they sell their invoices to a broker who advances them funds and gives them instant liquidity.
Instant payments expedite these transactions, allowing businesses to receive their funds quickly and make required payments without delay. This method is becoming increasingly popular as it provides a significant competitive advantage.
The transportation sector also includes a significant number of gig workers who would benefit from immediate payment, she added.
Gig workers, such as delivery drivers, can request instant payment for their services, ensuring the liquidity they need for their daily expenses. This feature is not limited to large corporations: even small local logistics companies are implementing instant payment systems to pay contractors faster, increasing employee satisfaction and retention.
Despite the clear benefits, there are several barriers to the adoption of instant payments. Education stands out as the main hurdle. Many small businesses and consumers are overwhelmed by the plethora of fast payment solutions available, such as Zelle, PayPal, and Venmo, and don't understand how instant payments on the RTP network are different or what the benefits actually mean.
“It's a precise payment made when you need it through a trusted banking partner,” Gers said. “Its advantages over many other payment methods are notable because the transaction is irreversible. If you get paid at 2pm, you can progress payment to your supplier at 2:02pm – there's no reversal.”
Increasing RTP Adoption and Expanding Use Cases in the Transportation Sector
Banks and financial institutions have a key role to play in bridging the knowledge gap regarding instant payments. As Gers noted, they need to proactively educate customers about the availability and benefits of RTP networks and integrate them into their online banking platforms to encourage their use. He noted that while many banks have updated their systems, they have not effectively communicated these changes to their customers.
Gers stressed that universal connectivity is essential for seamless adoption and called for all 9,000 banks in the U.S. to connect to the RTP network. By moving basic transactions to the RTP network, banks can offer their customers faster, more reliable payment options and reduce reliance on legacy methods such as checks and traditional ACH transfers.
Additionally, FinTech companies and other third parties providing payment services will need to incorporate the RTP network into their services to create a more integrated and comprehensive payments ecosystem.
