The evolution of payment options

For litigation attorneys and claims administrators, the process of making settlement disbursements by check is a costly, slow and inefficient endeavor. Many have turned to ACH or wire transfers. While these expedite delivery, they also introduce additional information security risks. You not only have to gather and process accurate bank routing and account numbers for each claimant, but store and protect that information securely.

If you’re settling a mass tort case where you have a relatively small pool of 1,000 claimants who are each receiving $350,000, these traditional payment options make sense. But they’re highly impractical when you’re dealing with a class action suit with a million people in the class, each slated to receive small fractional payments (e.g., $1 to $50).

Anytime you’re sending out 50,000 individual checks, the potential for fraud significantly increases. Regardless of whether you’re acting as claims administrator or counsel, any mishandling of settlement proceeds creates an opportunity for a possible breach of fiduciary responsibility or, at a minimum, significant reputational risk.

P2P platforms making inroads

Identifying the best approach for delivering settlement funds to your clients in the easiest, fastest and safest manner possible depends in large part on both the size and scope of the settlement as well as the amount of information the end recipient is willing to provide.

For smaller value class action settlements (where the need for a robust audit trail isn’t a key driver), P2P platforms such as Venmo and Zelle are proving effective in conveniently disbursing funds. They also help reduce information security concerns since claimants don’t need to provide you with an address or bank account information for electronic payment.

Rapid adoption

U.S. mobile payments totaled $310 billion in 2019. The final numbers for 2020 are expected to come in at around $400 billion (a 28% growth rate), with the total number of mobile payment users approaching 75 million.^{Disclosure 1}

Often, when a client requests payment via Zelle, Venmo, PayPal or other P2P platform, it’s a matter of convenience (or privacy). They’d rather not have to take the time to provide you with their bank account information. Because these are settlement funds, however, you may need more of an audit trail, which P2P payment platforms typically can’t provide.

Occasionally there may be an urgency to disburse funds to an individual immediately (or after hours or on a weekend). In these instances, you could potentially facilitate a real-time payment (RTP). RTP systems offer an instant, 24/7, interbank electronic fund transfer service that can be initiated through one of many channels: smartphones, tablets, digital wallets or the web.

Ultimately, we envision a settlement distribution process—from registration to payout—that will become completely self-service. This process will be married to technologies that enable the quick disbursement of funds directly to a phone number, email address or, as in the case of Visa Direct, into your credit card account.

Top benefits of electronic payments^{Disclosure 2}

• 53% of payment receivers say speed of payment
• 47% of payment senders say cost savings

COVID serving as an accelerant

With the onset of the COVID-19 pandemic, the preference for viable electronic payment solutions became amplified, as the desire to divorce paper from the payment process took on ever-greater importance. Physical checks need equipment to produce, manpower to process and track, and involve substantial cost to process and mail. Additionally, there’s a great deal of “hand holding” involved in traditional check disbursements, from people losing / not receiving checks to providing incorrect information, etc.

Digital payment options can eliminate many of the pain points that currently exist in the process. As more and more litigation firms conduct a greater portion of their business online, the need for remote capabilities will push banks and fintech companies to continue evolving online payment capabilities. The new world is going to look a lot different and will be far more electronic.

Traditional delivery

Nevertheless, the need to deliver funds via traditional check isn’t likely to completely disappear anytime soon. Clients and/or claims administration partners who need assistance with large-scale traditional check delivery occasionally request assistance from our Legal Specialty Group. Through Truist’s enterprise payment processing capabilities, we’re able to receive files directly from you and process and deliver your checks to the claimants of each case.

Truist looks to the future

The electronic payments future for Truist and its Legal Specialty Group clients is a rich one. However, it’s not so much about promoting any one payment solution as it is about working to ensure that we can make your firm more efficient and effective, while simultaneously delivering an optimal experience to claimants. More than $280B changes hands each year in the U.S. through the course of contingency litigation. It’s a tremendous amount of money that could benefit immensely from digital settlement fund disbursement.