How to provide faster payouts to your customers

Matthieu Blandineau
April 2024
min read

Payouts are how most payment companies, as well as lending, insurance or investment companies, realise value for their customers. For cash constraint merchants, individuals and businesses underwriting loans to finance critical investments or extend their working capital, or insureds undergoing a sinister payout speed can make or break a business – or change a life.

In a world where we are all used to instant confirmation of card payments and instant peer-to-peer payments in apps like Cash App, PayPal or Lydia, we expect fast payouts to be the norm, no matter the underlying complexity of these payments.

Leading payment companies are at the forefront of this trend. Sumup recently announced 7 am next-day payouts for its merchants in the UK. In its latest annual report, Wise showcases its ability to execute end-to-end payments in less than 20 seconds, which is one of the main benefits of its infrastructure and a main differentiator.

So, how can you compete? How can you provide faster payouts to your customers without hiring a team of hundreds of engineers to build a Wise-like payment infrastructure?

Access faster payment schemes

Even if every single part of your payout workflow is optimised, payments can only be as fast as the payment scheme used.

In SEPA, SEPA instant credit transfers must be executed in 10s maximum, whereas regular SEPA credit transfers take one business day. In the UK, a Bacs credit transfer takes three business days to be executed, whereas a Faster Payments (or FPS) payment is usually executed in a few seconds. 

Accessing these schemes to send instant payouts requires working and integrating with local banks connected to these local schemes. For instance, if you want to be able to send FPS payments in the UK, you need to work with a local UK bank, as a non-UK bank would first have to execute a cross-border payment to a UK bank that can take a few days to complete.

Remove intermediaries

There are many ways for a fintech company to send payouts to its customers. It can rely on another payment service provider (PSP) for payouts, work with a bank as a corporate customer, or become a payment system participant.

Each model introduces more or less intermediaries between the fintech company and the payment system and, therefore, the bank account on which the payout should arrive. Usually, working with PSP involves more intermediaries, while being a payment system participant makes you the closest to the scheme.

When sending a payout, each intermediary will have to process it, meaning run it through internal checks and workflows. These steps take time, and the more intermediaries there are, the more time it takes.

Becoming a payment system participant removes most intermediaries and therefore reduces the time it takes between when the fintech company orders the payment and when the payment is actually sent to the payment scheme and eventually arrives in the beneficiary bank account.

Automate internal processes

Various internal processes can add time between the moment the first step of a payout is initiated and the moment you send this payout on the payment scheme. To accelerate payouts, it’s critical to make these internal processes faster.

In the case of merchant acquirers, the fintech will collect payments from customers on behalf of a merchant and then pay the corresponding funds to the merchant. A merchant acquirer usually makes sure the funds are actually received from the customers before sending the payout to the merchant. To do so, it needs to track and reconcile the payments collected with the corresponding transactions on its bank account, which can take time if not correctly automated.

For fintechs holding accounts or wallets for their customers, the steps it takes to payout an order initiated by a customer usually are:

  • Checking the balance of the account or digital wallet to make sure there are enough funds for the said payment

  • Running compliance checks on the payment

  • Routing the payment to the right partner bank depending on the destination of the payment (e.g. SEPA sponsor bank for payment to SEPA area or UK partner bank for payment to the UK)

  • Packaging the payment order in the right message and file format or API call so it is accepted and executed by the partner bank without error.

How Numeral helps fintech companies accelerate their payouts

Numeral is a payment technology company. We provide a modern multi-bank, multi-scheme payout platform in Europe to leading fintechs like Alma and Finqle.

Numeral enables fintechs to access faster payment schemes by integrating with local EU and UK banks, offering their customers SEPA instant or FPS payment methods.

We get fintechs closer to payment systems by enabling them to become indirect participants of SEPA, Bacs, and FPS easily.

Finally, we accelerate internal processes by automating payment operations such as payment routing and packaging of payment order and automating reconciliations of all outgoing and incoming payments, including card payments.

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