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?

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.

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.

Whether collecting payments on behalf of merchants, extending loans, or providing insurance, most fintech services value is realised when a payment is made to their merchants, partners, and customers.

But merchants, partners, and customers increasingly demand faster, more reliable, and more economical payouts. And providing competitive payouts is hard:

In this section of the article, we explore how Mambu Payments enables fintech companies to deliver competitive payouts.

At Mambu Payments, we are convinced that growing fintech companies should partner with banks to build their payment infrastructure. This applies even more to payouts, for which reducing the number of intermediaries in the flow of funds unlocks faster payouts and improves unit economics.

Multiplying banking partners provides additional benefits for payout use cases. Sending payouts from local IBANs increases merchants' and customers' trust while preventing IBAN discrimination from their financial institutions.

Connecting with local banks in the markets you address enables you to access local payment schemes and systems, such as Bacs and FPS in the UK, RIX in Sweden or Straksclearing in Denmark.

Finally, it increases payout reliability by providing fintech companies with multiple routes to send a given payment in case a specific partner bank is unavailable or the receiving bank doesn’t support a payment method.

However, building, maintaining and operating a multi-bank infrastructure requires significant resources – leading fintech and payment companies such Wise, Klarna, or Booking.com have dedicated teams of hundreds of engineers to do so.