15 November 2022, 2:30 (CET)


How they can best optimize their payment systems now

As account-to-account payments move into the mainstream, we explain how insurers can optimise their payment systems for security, efficiency, and customer retention.

What to expect in this blog:

  • The rise of account-to-account payments
  • A2A payments overtake traditional payment solutions
  • Integrate account-to-account payments easily – here’s how

The rise of account-to-account payments

Account-to-account payments are on the rise. McKinsey & Co’s 2019 Global Payments Report1 even suggested they will eventually ‘threaten cards’ as the leading choice for non-cash retail payments. In Europe, studies show that A2A payments account for 13% of all recent checkouts2 and 81% of European consumers3 say they’re ‘likely’ to make an A2A payment in future. Growth has partly been facilitated thanks to the Revised Payment Services Directive (PSD2), which pushes payment initiation services through open banking APIs, but there are other reasons for A2A payments growing popularity on the continent and elsewhere. A2A solutions with Open Banking allow for more reliable authentication, greater access to data, and more efficient, automated processing than older A2A methods like direct debit and bank transfer. All of which explain their growing popularity.

A2A payments are attractive to retailers because they’re cheaper, faster, more secure, and more reliable than cards, and Open Banking allows significant upgrades to currently existing A2A methods. But their benefits extend to other service industries as well. Enterprises that process consumer-to-business payments with high volume are particularly apt to benefit from the instant and irrevocable transactions A2A payments can offer. Foremost among them are utilities, telecoms, and insurance firms. The most popular payment method for insurance firms is already a form of A2A payment—direct debits—but as A2A solutions evolve, there’s significant room for improvement.

A2A payments overtake traditional payment solutions

There are multiple reasons experts predict that A2A payments will account for 20% of e-commerce payments in 2023. The improved customer experience and cost of paying without an intermediary is a draw in any industry, but A2A payments offer a specific set of advantages to insurers.

#1: Security

Global losses from payment fraud have tripled4 in the last decade with the introduction of new technologies. Since the insurance industry has been rushing to digitise5 in recent years, that makes firms increasingly susceptible. This can cause major hurdles for attractive and retaining customers. Adopting a best-in-class A2A payments solution can help insurers overcome these challenges because PSD2—the directive governing PSPs in the European Economic Area—requires the use of Strong Customer Authentication (SCA). This means end-consumers are made to confirm their identities for the majority of transactions, creating a safer payments ecosystem for PSPs, companies, and consumers. SEPAexpress’s services require authentication for the first, and riskiest, ensure that the policyholder and feepayer match, and provide IBAN data to the insurer. All of this saves time at the point of payment, and reduces risk later on.

#2: Reconciliation and Payouts

Reconciliation is traditionally a lengthy, labour-intensive process for insurers. Done manually, it requires attention to payment allocation, chargeback reports, and confirmations. With a best-in-class A2A payments solution like SEPAexpress, though, all of this information can be processed and provided automatically. Similarly, in the event that a claim is made and settled, everything can be handled through a single interface without the need for intermediaries, simplifying and optimising the process.

#3: Customer journey

Noone enjoys buying insurance, but everyone knows it’s a necessity. For many mortgage holders, it’s even a legal obligation. With a glut of brokers and comparison services guiding consumers to the best services available, firms that can offer a fast, seamless customer journey are likely to beat the competition. In fact, 70% of consumers6 say they want faster payment access. With account-to-account payments, insurers can offer a smooth customer journey without intermediaries. For mortgage holders especially, it can be a serious problem if an insurance policy lapses, even leading to higher premiums for future loans. With A2A payments ensuring a simple, uninterrupted way to pay for insurance and similar subscription services, customers can feel safe with their providers. Firms enjoy the benefits of efficient premium collection, and consumers can receive quick payouts when needed.

#4: Risk Management

Open Banking and A2A payments are made possible by the sharing of information. PSD2 made it an obligation for banks to instantly share data and account access to authorised third parties with prior consent from the owner. This is significant for the insurance industry because it makes risk management considerably easier. The more data a firm has to work with, the more accurately they can calculate risk. With A2A payments insurers can use that data, along with risk engines, liquidity checks, and amount limits, to make more reliable assumptions before issuing policies. Risk management is a complicated business, but with A2A payments, insurers can effectively outsource it to their payment service provider, safe in the knowledge that they’re benefitting from a huge array of reliable data.



Integrate account-to-account payments easily. Here's how

Considering the benefits that integrating A2A payments can offer, insurers could be forgiven for assuming the transition would be difficult. Fortunately for them, it couldn’t be easier. Thanks to PSD2 regulation, and the fact 84% of Europeans already have a bank account and process 25 billion direct debit payments a year, the infrastructure is already in place. When it comes to the product, insurers can’t do better than SEPAexpress’s white label account-to-account payments products. These are fully white-labelled, fully branded, plug and play solutions that customers will assume have been built in-house. The only difference is SEPAexpress builds and maintains them, and firms can benefit from all the data, experience, and learnings of a best-in-class PSP.

To find out more about SEPAexpress’s A2A payments offering, book a demo today.

1 McKinsey & Company: Global Payments Reports 2019: Amid sustained growth, accelerating challenges demand bold actions. [online] https://www.mckinsey.com/~/media/mckinsey/industries/financial%20services/our%20insights/tracking%20the%20sources%20of%20robust%20payments%20growth%20mckinsey%20global%20payments%20map/global-payments-report-2019-amid-sustained-growth-vf.ashx [26.10.2022]

2 PYMNTS (2021, 27.Septmeber): Deep Dive: Why Debit Is Driving the A2A Payments Expansion. [online] https://www.pymnts.com/next-gen-debit/2021/deep-dive-debit-driving-a2a-payments-expansion/ [26.10.2022]

3 Duncan Ellie (2021, 09.June): New research finds European consumers mostly favour A2A payments over cards. [online] https://www.openbankingexpo.com/news/new-research-finds-european-consumers-mostly-favour-a2a-payments-over-cards/ [26.10.2022]

4 MERCHANT SAVVY (2022, Octobre): Global Payment Fraud Statistics, Trends & Forecasts. [online] https://www.merchantsavvy.co.uk/payment-fraud-statistics/ [26.10.2022]

5 Hay, Laura J: The COVID-19 catalyst: Insurers race to digitize Insurers have sped up their digitization agendas. Are they ready to compete in the new reality? [online] https://home.kpmg/xx/en/home/insights/2020/11/the-covid-19-catalyst-insurers-race-to-digitize.html [26.10.2022]

6 Orum (2022, 10. June): What Are A2A Payments? Here’s Everything You Need To Know. [online] https://orum.io/what-are-a2a-payments/ (orum.io) [26.10.2022]

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