Today, electronic and card payments are mainstream, with an increasing number of consumers using these payment options for a variety of transactions including bill payments. As adoption of electronic and card payments continues to grow, innovative companies are offering a diversified payment mix to address demand, strengthen relationships and streamline processing.
At the same time, the current economic climate requires insurance companies to deliver top-notch customer service and employ efficiency and cost-control measures. As a result, leading insurers are implementing a wide range of payment options, while exploring methods to reduce card processing costs and more efficiently manage payments-related compliance requirements.
THE NEED FOR SPEED
Many consumers are making the shift from writing paper checks to electronically sending payments. By 2011, more than 59 million households will pay bills online, a 63% increase from 2007, according to a recent Forrester study. Electronic payments provide consumers with flexible, convenient options-they can choose the channel that best fits their busy schedules and even set up recurring payments.
For insurers, collection is more cost efficient, and electronic payments can be received faster than traditional methods. Further, an electronic payment option improves relationships by providing increased customer access and control.
According to the Western Union Global Business Payments Money Mindset Index, 30% of consumers plan to pay bills with debit cards, compared to 26% in the previous quarter. Similarly, 14% of consumers plan to pay bills with credit cards, compared to 10% in the previous quarter. Insurers must meet consumer demand, or risk losing customers and their competitive position.
REGULATION AND COMPLIANCE
Several resource-intensive-and sometimes costly-barriers exist for insurers offering card payments. One challenge is the cost and time associated with ensuring compliance in the heavily regulated card industry. Billers spend thousands of dollars annually managing their card compliance process, and failing to comply can result in significant fines. Utilizing a third-party outsourcer to help manage the regulatory process lets insurers focus on their core business-customer service, retention and competitive differentiation.
Another barrier associated with offering card payments is the cost and fees associated with providing this payment option. Offering customers alternative payment methods and channels can help mitigate these costs. By outsourcing to a third-party payment processor, insurers can easily expand their payment channels, while realizing savings passed through from the processor's own economies of scale and partner relationships.
While the many benefits of card payments are clear, the growing cost of card payments presents an early hurdle for many companies-including one of the top auto insurers in the country. The company saw card payments as a tool to bolster its reputation for strong customer service, but as the total number of card payments continued to grow, the cost of processing card payments became an issue.
The client implemented an improved consumer-choice routing solution, which was equipped to identify the type of card in real-time. This enabled the company to maximize the number of payments processed through the ATM networks, and reduce card payment processing costs. Since implementing consumer-choice routing in January 2008, the company's card payment volume increased by 67%. As of April 2009, 24% of payments were processed via the ATM networks compared to 16% in 2007. This boost in ATM payment volume resulted in substantial cost savings for the company-between January 2008 and April 2009, the company saved a total of $7.2 million in processing costs.
Innovative companies are already implementing a suite of convenient payment options, including electronic and card payments. A flexible card payments solution can help insurers maximize the number of payments processed via the more affordable ATM networks through consumer-choice routing, helping further accelerate settlement and reduce payment processing expenses. Further, by outsourcing the payments-related compliance process, billers can save resources. Leveraging a third-party partner to offer a diverse payments mix provides consumers the payment choices they prefer while helping the company reduce costs and enhance the customer experience.
Donna Kennedy, is VP Business Development, at Englewood, Colo.-based Western Union Global Business Payments.
