Traditional payout and disbursement methods have successfully served large swathes of the economy for decades. The four traditional payout methods—checks, ACH payments, wire transfers, and Push-to-Card payments—are all viable options when businesses are looking to send payouts to consumers, primarily when payments are reasonably large and conducted on a fixed basis.
However, these traditional options are frequently insufficient when it comes to an emerging— and expanding—category of high-velocity, low-volume payouts. Especially payouts which need to be sent internationally.
Why aren’t these traditional methods applicable in every situation? Some methods are expensive: paying $50 to perform a wire transfer hardly provides value for money for a low-volume payout amounting to a lower sum. Checks and ACH payments cannot always be used internationally. Push-to-Card payments are sent to an individual’s bank account, whereas the recipient may want to receive their payout elsewhere.
A significant chunk of the economy relies on regular, low-volume transactions, and these require a payouts mechanism that is more flexible than the default.
Digital value is becoming a more mainstream way for businesses to issue high-velocity, low-volume payouts to consumers and employees. It can be transferred without the complex infrastructure, integration protocols, and compliance requirements that characterize traditional payouts. In many cases, transferring digital value requires only an email address—no interaction with banks, and no disproportionate costs.
For digital value and the transfer of it to complete its transition into everyday usage, businesses must adopt a new payments infrastructure capable of storing and utilizing digital value instantly, affordably, and across borders.
How and Why Digital Value Is Becoming the Norm
The concept of digital value has evolved to include any currency, electronic store of value, or medium of exchange that is managed, stored, or transacted on digital computer systems. Different types include cryptocurrencies, central bank digital currencies, and virtual and branded currencies. Digital value has risen in popularity over the past decade with the growth of cryptocurrencies, which have complemented older forms of prepaid assets whose popularity also continues to increase.
Due to the growing adoption of various categories of digital value, more people are seeking to receive payouts in digital forms. This is especially applicable for the likely recipients of high-velocity, low-volume payouts, including gig workers (Uber, DoorDash, and countless others), content creators, and a wide variety of consumers.
To make this a reality, businesses must deploy a suitable payment rail comparable to that of the fiat currency system. The absence of such an alternative is a significant pain point.
Gig workers are not the only example of a category underserved by current payouts methods, but they are a highly pertinent one. Many now expect same-day payouts, but attempted solutions such as Visa Direct were never widely used because businesses faced excessive infrastructure costs and gig workers themselves had to foot the bill for transaction costs, which many simply refused to do.
The challenge facing these underserved individuals opens the door to a truly game-changing shift in the future of digital payment networks—specifically, a payment rail that enables users to transfer and extract the digital value of their purchases freely and instantly.
In such a case, a gig driver could receive and store a digital payout in an online digital wallet and redeem it in the form of their choosing—say, as instant credit for groceries, household items, or fuel. Such a flexible payment system would eliminate the need to withdraw funds from a bank account or pay prohibitive transaction fees, saving both time and money.
Creating a modernized payouts infrastructure is essential if digital value is to realize its full potential as both a means of storing value and a medium of exchange.
Trailblazing Toward New Payouts Infrastructures
Legacy payout systems will remain standard within the industry—it should not be forgotten that they serve the needs of their users in most cases, most of the time. Managing payroll or conducting large B2B payments do not require a fundamentally revamped infrastructure.
However, the traditional systems must be complemented by new and improved digital payment models that serve the needs of particular sectors of the economy, or specific categories of recipient, whose requirements are largely unmet by the major traditional payout solutions.
And with the exchange of digitally earned value gaining more traction throughout the economy, the need for businesses and independent merchants to handle their payouts in the manner most convenient to recipients is only set to increase.
A versatile digital value infrastructure can provide this sizable industry with a win-win solution for individuals and companies alike to store and spend digital value from B2B, B2C, C2B, and C2C payouts and micro-payments, anytime, anywhere. If properly leveraged, the digital value network could very well pioneer an entirely new way of handling transactions.