Windowless Payroll from Kotapay

by Trent Sorbe, Chief Payments Officer

While most of the use cases are still in their infancy, few would dispute that payroll will be an early and perhaps the largest adopter of real-time payments. Here, the use cases seem obvious, as payroll can be sent 24/7/365, meaning delays caused by federal holidays and Nacha cut-off times will be reduced. Payroll and payout of tips can also be accelerated to the point that a day’s pay could be in the employee’s bank account seconds after clocking out. 

Admittedly, moving payroll at such speeds will require time and attendance systems to be integrated with payroll systems – which will in turn need to be integrated with financial institutions capable of sending and receiving a real-time payment. Latest estimates from the Federal Reserve and The Clearinghouse indicate that at least 1,500 banks have successfully enrolled or are in the process of deploying in the service with one or both providers. 

Kotapay and First International Bank & Trust will be ready for instant payments later this Summer. While the benefits for employees appear obvious, instant payments also stand to benefit employers, most of which fund payroll days in advance and/or via costly wire transfers. The ability to make payments in real time will allow an employer to fund payroll 24/7/365, conceivably triggering the distribution of payroll via ACH or instant payment (or a combination) immediately upon receipt by Kotapay – a concept we refer to as Windowless Payroll. 

Windowless Payroll at Kotapay will enable our clients to send funds to us as late as Friday morning, and those funds will still be received by employees immediately if they are sent in real time or later in the day via same-day ACH. Payroll processors also stand to benefit from real-time payments, as funds sent to Kotapay are settled immediately and not subject to return or reclamation. Like a wire transfer, the instant payment model is a “good funds” model. Unlike a wire, however, the cost of a real-time payment will be substantially less and credit for receipt does not require that the sending or receiving bank be open or an individual to initiate or monitor for receipt. 

At Kotapay, we estimate that well over fifty percent of employers sending payroll to us are banking with an institution already capable of sending a real-time payment. So, while the industry is still familiarizing itself with these instant payments, Kotapay has already deployed its project team and actively upgrading our systems and capabilities. Our goal is to be able to send real-time transactions to employees in early summer and to launch Windowless Payroll to our processors in late summer.

Continue monitoring our blog and newsletter to stay abreast of our progress and watch for free webinars we will be hosting to not only explain our new capabilities but to help all of you understand the opportunity created by going “Windowless.”