insuretech payment solution
06 September 2022, 8:50 (CEST)

A2A FOR INSURTECHS

What advantages the opportunity of this payment method brings for InsurTechs.


Account-to-account payments aren’t new. We’ve been using debit and credit cards to move funds from one account to another for decades, but a new generation of A2A payment technologies that don’t rely on intermediaries is rolling in fast. The overall use of real-time disbursements has tripled since 20201, and in 2021, the number of open banking payments rose by 500%.2 In fact, by 2023, A2A payments are predicted to outnumber3 credit and debit cards.


Blog-Overview:

  • The benefits of account-to-account payments for InsurTech
  • InsurTech firms need to adopt A2A payment solutions
  • Which payment method is right for your business?
  • How to choose a direct debit provider

A2A payments are fast, cheap, convenient, and secure. Their quick adoption in multiple sectors has raised consumers’ expectations when it comes to their payments journey, and businesses failing to provide a comparable experience are taking a risk with customer stickiness and, ultimately, revenue. That holds true for any industry, but especially InsurTech.
With the macroeconomic pressures caused by Covid-19 and the cost-of-living crisis, the insurance industry has taken a hit. Profit margins are the tightest they’ve been in 10 years, with premium growth slowing to from 4% to just 1.2%.4 And with EU and UK card interchange fees rising from 0.2% to 1.5% since Brexit made the EU-mandated cap on fees no longer applicable, transaction costs are rising too. Payments is an area in which InsurTech businesses can make efficiencies and improve their customer journey, and account-to-account payments are an excellent place to start.

The benefits of account-to-account payments for InsurTech

#1: Improve the customer experience

Anticipating policyholders’ needs is crucial to InsurTechs’ success. Policyholders don’t want to deal with intermediaries or add card details multiple times. They want fast, reliable payment alternatives, and catering to their needs has advantages for firms too. A quick, seamless payment process means efficient premium collection and prompt payouts. With A2A payments solutions, providers can ensure a smooth journey and customer retention.

#2: Improve risk management

The insurance industry relies on accurately calculating risk, and payments shouldn’t be an exception. A2A payment solutions provide functionality such as risk engines and amount limits, allowing insurers to automate areas of decision-making by using predefined parameters. This essentially outsources the complexity of risk management to the A2A provider, ensuring an extra layer of security for insurers.

#3: Reduce chargebacks and mitigate fraud

Card fraud is increasingly common globally. In Europe, fraudulent transactions accounted for over €1.87 billion5 of losses in 2019. When an insurer has a relatively high chargeback rate or is subject to fraudulent card use, card issuers will automatically consider them high risk. A2A payments sidestep the problem by requiring strong customer authentication (SCA), requiring end-consumers to confirm their identities for the majority of transactions, and ensuring greater security all round.

#4: Improve efficiencies and resilience

Account-to-account payments remove the need for costly intermediaries by allowing direct disbursements from one account to another. It’s a safe and secure method that streamlines cash flow by automating quick payments—including push and pull payments—and provides transparent, real-time data. A2A payments also improve client reach. Anyone with a bank account can use them, and policyholders can make prompt payments from anywhere without paying bank deductions.

#5: Reduce fees and increase cash flow

Account-to-account payments don’t come with the same interchange fees as card payments, meaning insurers keep a greater portion of their sales. Thanks to innovations like Open Banking, which allows APIs to connect banks with third-party providers, both consumers and insurers can benefit from instantaneous transfers, reducing not only fees, but administrative and accounting costs as well.

InsurTech firms need to adopt A2A payment solutions

InsurTech funding fell sharply in the first quarter of 2022, and it’s yet to recover. Renewing confidence from investors and consumers in the coming year will require firms to demonstrate their value across the board. Security, efficiency, and customer retention are all areas for improvement. Upgrading to a modern A2A payments solution is a strong place to start.
When it comes to integrating an embedded A2A payments solution, Insurtech firms have a number of options, from a fully self-built system to various degrees of white-label integration. You can learn more in our piece: White-Label Alternative Payments Solutions. Once the solution is in place, Insurtech firms can move away from the costly, inefficient, and insecure world of traditional card payments and intermediaries, and offer their customers a quicker, easier, more reliable service.

Wrap-up

SEPAexpress provides A2A solutions with best-in-class status updates and chargeback reporting, allowing only account holders to complete purchases and perform accurate credit checks using all information available. They come with minimal set-up and administrative requirements, and facilitate quick, convenient transfers between insurers and consumers, building trust and improving both customer acquisition and retention. That’s why SEPAexpress is trusted by over 500 million bank accounts in 34 countries.
Payments are a frequently overlooked area for most businesses, but a quality white-label A2A payment solution represents an opportunity InsurTechs can’t afford to ignore. Find out more about account-to-account payments here.

 

1 PYMNTS: Faster Payments. How Consumers are driving demand for Real-Time Payments. [online]
https://www.pymnts.com/news/faster-payments/2021/how-consumers-are-driving-demand-real-time-payments/ [07.10.2022]

2 OPEN BANKING: 5 million users – open banking growth unpacked. [online]
https://www.openbanking.org.uk/news/5-million-users-open-banking-growth-unpacked/#:~:text=At%20the%20end%20of%202021,than%20500%25%20in%2012%20months [07.10.2022]

3 Finextra – Clyde, Todd: Will A2A payments move into the mainstream and reshape the payments landscape?. [online]
https://www.finextra.com/blogposting/21104/will-a2a-payments-move-into-the-mainstream-and-reshape-the-payments-landscape [07.10.2022]

4 McKinsey&Company: Creating value, finding focus: Global Insurance Report 2022. [online]
https://www.mckinsey.com/industries/financial-services/our-insights/creating-value-finding-focus-global-insurance-report-2022 [07.10.2022]

5 EUROPEAN CENTRAL BANK: Seventh report on card fraud. [online]
https://www.ecb.europa.eu/pub/cardfraud/html/ecb.cardfraudreport202110~cac4c418e8.en.html [07.10.2022]

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Sabrina Jaksche

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