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Instant payouts are the fastest way to send funds from your business. Learn what instant payouts are, what they offer, which industries need them, and how to set them up fast and effectively.
Updated:
September 11, 2024
by
Aeropay Team
Instant payouts are the real-time tool every business should offer.
The future is here, and it's instant. 60% of businesses now prioritize quicker access to funds. They're exploring and adopting emerging open banking money movement methods like pay-by-bank (also known as A2A payments).
Similarly, consumers are growing accustomed to faster payouts for rewards, withdrawals, and payments.
Instant payouts bring immediate settlement to the United States, where funds traditionally take days or even weeks to hit customer accounts.
For businesses in 2024, the reality is your customers want faster payouts — and they are willing to switch platforms to get them.
What are instant payouts?
Instant payouts transfer funds from businesses to consumers in real-time, even during holidays, weekends, or after business hours — offering faster settlement than standard ACH payout schedules that take T+3 business days to process.
Instant payouts use application programming interfaces (APIs) to link banks and connect with real-time payment rails like RTP and FedNow, enabling faster payment processing times than standard payouts.
With instant payouts, businesses can send funds, or enable user withdrawals, directly and immediately. The receiver doesn’t wait for their payment and the sender sees funds transfer instantly.
Instant payout providers — like Aeropay — enable and automate instant settlement payouts, helping reduce the manual time needed to manage payouts and increasing the likelihood the payout will be successful.
How instant payouts work
Instant payouts are enabled with direct account-to-account connections. This means each party’s bank account is connected via secure APIs, and the funds are processed over real-time rails instead of ACH or card networks.
The process involves 4 key steps:
1. Authentication (for first-time transactions)
Before an instant payout is initiated, the receiver’s payout account must be authenticated and “linked” to the merchant’s. This onboarding process is easily completed using an aggregator with direct bank APIs, like Aerosync, which verifies an account by enabling the user to log in to their bank directly.
2. Initiation
The receiver makes a transfer request through their preferred payout method. For example, this can be done within an online sportsbook or gaming platform, where users request withdrawals from their available balance.
3. Processing
When the transfer request is made, details like the instant payout amount, recipient’s account info, and any required authentication credentials are shared. Then, the payment processor verifies these details to ensure sufficient funds from the sender and correct recipient information, incorporating security measures to prevent fraud.
4. Money movement and settlement
Once the payout is approved, funds are moved from the merchant’s bank to the receiver’s account. Depending on the receiver’s bank and the merchant’s payment processing partner, there are three different rails the funds can move along:
1. RTP® - RTP from The Clearing House is a real-time payments platform that offers instant payouts on its rails. Almost all U.S. financial institutions have access to RTP, and more are joining as volume grows. Right now, RTP is primarily used to send payments as real-time requests for payment aren’t widely available.
2. FedNow® - The Federal Reserve’s instant payment service was launched in 2023 to allow businesses and individuals to send and receive instant payouts in real time, around the clock, every day of the year.
3. ACH - If the receiver’s bank does not connect with RTP or FedNow, the payout will default to ACH electronic transactions in a batch environment. Funds are typically processed within 1 to 3 days, depending on the processing window (First Same Day ACH, Second Same Day ACH, Third Same Day ACH, Next Day ACH).
Benefits of instant payouts
When a business is able to pay out funds faster, there are considerable advantages related to business health, customer experience, and overall company success.
Cash flow management
A U.S. Bank study by Jessie Hagan found 82% of businesses fail due to cash flow mismanagement. Instant payouts improve cash flow management for businesses because they streamline the transfer of funds, allowing businesses to better visualize and manage their working capital.
Enhanced user experience
Consumers appreciate convenience, a lot. Instant payouts appeal to customer demand for faster, more efficient, and more effective solutions. For example, instant payouts enable businesses to process and send refunds immediately, improving what can be a tedious, aggravating process.
Competitive advantage
Instant payouts are a competitive advantage for businesses because they’re directly beneficial for all parties involved. Users enjoy immediate withdrawals, instant refunds, and direct rewards. Partners enjoy immediate access to funds for goods or services. Employees enjoy fast, direct deposit payments. And business owners reap the benefits of transparency in their payments operations.
Industries that need instant payouts
aInstant payouts are still in the early stages of mass adoption in the United States, but there are clear opportunities for many industries to onboard and utilize this modern payments technology.
These industries have the highest potential to transform their approach with instant payouts:
Online gaming
Sportsbooks, Daily Fantasy Sports, iCasinos, Sweepstakes and other online gaming verticals face high acquisition costs and steep competition. To maximize first-time deposits and ensure players return to their platform, online gaming companies must offer their players instant payouts (also known as instant withdrawals).
The data supports this; 79% of gamers who are offered instant withdrawals would choose them if they could.
Credit or debit card gaming payments / payouts typically take too long to settle (which deters potential players from depositing funds). But when they’re offered assurance they can access their winnings instantly, trust is established and players are far more likely to choose your platform over competitors.
For example, PrizePicks leverages Aeropay to enable instant withdrawals for their players — ensuring their users have an option for immediate payouts.
Online investing
Savvy investors understand the value of liquid funds, whether they’re looking to reinvest their funds or just withdraw their money — they’re looking for the fastest available option.
Instant payouts help online investing and trading platforms by assuring customers they can invest with the utmost efficiency. This helps acquire both traditional traders who are looking for a new advantage, as well as the next generation of younger investors interested in modern experiences.
Lending
As of January 2024, 48% of borrowers received consumer loan disbursements via instant payment methods — a 15% increase year over year. Instant lending is a fast-growing segment because borrowers often want or need funds quickly.
Lenders should add instant payouts to both satisfy this consumer demand for faster disbursement as well as to streamline back-office operations — reducing costs associated with manually tracking, initiating and reconciling payouts.
Retail
Retailers benefit from instant payouts by offering immediate refunds to customers, improving a typically cumbersome and irritating experience. This is particularly true for large purchases like cars — where a customer might feel anxious awaiting a large sum of money to be returned to their account.
Instant payouts also help streamline supplier payments, improving inventory turnover and supplier relationships as well as company cashflow.
Marketplaces
Marketplaces, which act as intermediaries between buyers and sellers, create a superior product experience by offering instant payouts to their vendors.
For example, rideshare companies leveraging instant payouts enable their drivers to request instant payouts and receive their money in seconds or minutes.
Instant payouts aren’t just convenient for marketplace vendors, they directly influence the cash flow of these individuals (and their businesses) and can also indirectly impact the financial inclusion of those same individuals.
The gig economy
Instant payouts will revolutionize the modern gig economy, which is expected to contribute nearly $500 billion to the global economy in 2024.
By providing instant payouts to gig workers like freelancers, businesses are both more likely to retain those 1099 employees and increase their willingness to work more. Plus, they offer a compelling and competitive advantage to retain top talent looking for fast payment.
Why don’t all businesses use instant payouts?
A question businesses who are researching instant payouts often ask is: If instant payouts are so simple and impactful, why doesn’t every business use them?
The answer has a few parts:
1. Not every business is a good fit for instant payouts (right now)
2. Many businesses aren’t aware instant payouts exist (yet)
Instant payouts are still very new in the United States. But this is changing quickly as real-time networks like FedNow ramp up their available banking partners. For example, FedNow has ambitious plans to attract up to about 8,000 financial institutions.
3. Enabling instant payouts requires the right partner
Not every processor offers the infrastructure to securely link bank accounts and send funds along RTP rails. For example, Aeropay offers:
FedNow and RTP bank connections
Customizable user onboarding
Robust API integration
Automated settlement processes
Secure transaction verification
How to offer instant payouts at your business
It’s surprisingly easy to onboard instant payouts. Here’s how it works:
1. Onboard a reliable instant payout partner
Choose a partner like Aeropay that offers the necessary infrastructure and support for real-time payouts.
2. Integrate your instant payout system (SDK or API)
Use our API to develop an easy deposit and withdraw flow that works for your business.
3. Add your instant payout offering
Promote the availability of instant payouts to your customers to boost adoption and enhance their experience.
Aeropay’s instant payout solution
Instant payouts with Aeropay are a seamless way to integrate and offer instant payouts to your customers. With our robust API and secure bank connections, businesses see fast, reliable, and secure transfers.
Aeropay instant payouts include:
Real-time payout processing to keep your cash flow moving smoothly.
Advanced fraud prevention measures to protect your transactions.
Simple and customizable API integration for a smooth onboarding process.
Immediate access to funds to improve user experience and loyalty.
Initiating an instant payout involves using a secure API to connect your business’s bank account to the recipient’s account. Once authenticated, you can trigger transfers through your chosen platform, such as a payroll system or freelance marketplace.
Do instant payouts work with ACH?
Instant payouts typically use real-time payment rails like RTP and FedNow for immediate transfers. However, if the recipient’s bank doesn’t support these rails, the payout can default to ACH, which takes 1-3 business days.
How long does it take for an instant payout to process?
Instant payouts process in real-time, meaning funds are transferred immediately upon approval. The exact time may vary slightly depending on the banks involved, but it is generally a matter of seconds or minutes.
What banks support instant payouts?
Most major U.S. banks support real-time payment rails like RTP and FedNow. You can find the full list of RTP-supported banks here. As adoption grows, more financial institutions are expected to join these networks.
Are instant payouts secure?
Yes, instant payouts are very secure. Instead of asking for card details (like Visa or Mastercard), they use bank-level encryption and real-time fraud prevention measures to ensure transactions are safe and verified before processing.
Can businesses of all sizes use instant payouts?
Yes, businesses of all sizes have eligibility and can benefit from instant payouts. Whether you’re a small business looking to streamline payments or a large enterprise aiming to enhance customer satisfaction, instant payouts offer a versatile solution.
How do instant payouts improve customer satisfaction?
Instant payouts provide immediate access to funds, enhancing the customer experience by offering faster refunds, withdrawals, and rewards. This convenience can lead to higher customer loyalty and satisfaction.
What industries benefit most from instant payouts?
Industries such as online gaming, investing, lending, retail, marketplaces, and the gig economy benefit significantly from instant payouts due to their need for quick and efficient fund transfers.
What are the costs associated with instant payouts?
The pricing related to instant payout fees varies depending on the provider, your industry, and the volume/size of payout transactions. However, processing fees are typically minimal in comparison to the operational and customer retention gains instant payouts unlock.
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