PYMNTS Intelligence, The Clearing House
October 2023
Real-Time Payments Tracker® Series

Fast-Tracking Funds: Finance and Insurance Accelerate Payments

Finance and insurance companies make enormous payouts all the time, often on very short notice. Real-time payments in these industries can make a profound difference in customers’ lives — and customers will not forget that.

Real-time payments in the finance and insurance industries can make a profound difference in customers’ lives — and customers will not forget that.
  • Swift and accurate payouts are critical in the financial and insurance industries, but legacy payment systems are not cutting it. Delays and errors can damage customer loyalty and ultimately lead to lost business.
  • Customers are fed up with the status quo surrounding payments and are demanding improvements. They seek the speed, simplicity and seamless experience they enjoy in other aspects of their digital lives. While some customers may be willing to pay a price for these enhancements, others view them with skepticism.
  • With consumers showing a willingness to switch financial institutions (FIs) and insurance carriers to meet their payment goals, firms are tuning in to these demands and implementing real-time payment options en masse. The proactive approach helps them both outpace the competition and hold on to their customers.

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    Legacy payments have been a problem across all industries, with paper checks, postal and delivery services causing payment errors, delays and endless complications. Nowhere is this more keenly felt than in the finance and insurance industries, where the entire business model revolves around transacting with customers.

    Accelerating payments on both the sending and receiving ends could be a boon for these industries, leading to more accurate cash flow, better transparency in payment timing and a more loyal customer base. Real-time payments systems emerge as a promising solution to deliver on these promises and more.

    Legacy Payment Systems Hamper Timely Customer Payments

    Swift and accurate payouts are critical in the financial and insurance industries, but legacy payment systems are not cutting it. Delays and errors can damage customer loyalty and ultimately lead to lost business.

    Natural disasters mean insurance customers need money fast.

    Payouts for natural disaster damage in the U.S. surpassed $275 billion between 2020 and 2022 — the most in any three-year period — straining insurance companies to their limit. Disaster victims cannot afford to wait until payments clear before rebuilding their lives. In fact, more than one-quarter of policyholders switch providers to achieve faster payouts. Additionally, given that roughly 40% of insurers fail to offer payment options preferred by policyholders, switching providers becomes one method by which customers can make their opinions known.

    40%

    of insurers fail to provide the payment options that customers prefer.

    Hope Hacker

    Hope Hacker

    Assistant vice president

    Whether it’s hurricanes, fires or other natural disasters, the people living in these situations need to get those funds in their hands in real time to cover expenses, or for their possessions to be reimbursed or fixed.

    Wells Fargo recently lost some customer deposits due to a claimed technical issue.

    Even more troubling than having delayed payouts is losing money altogether, as some Wells Fargo customers experienced in August. While the so-called processing error was eventually resolved, customers had no access to their funds for several days, a predicament that can be particularly devastating for households living paycheck to paycheck.

    A similar issue affected Wells Fargo customers last March, with a technical glitch misrepresenting customers’ account balances. Real-time payments could potentially mitigate these issues, as resolving payments instantly ensures accurate account balances.

    Insurance and Finance Customers Demand Better Payment Options

    Customers are fed up with the status quo surrounding payments and are demanding improvements. They seek the speed, simplicity and seamless experience they enjoy in other aspects of their digital lives. While some customers may be willing to pay a price for these enhancements, others view them with skepticism.

    61%

    of millennials say they are highly interested in real-time payments.

    Real-time payments are critical to a smooth customer experience.

    A recent survey of organizations implementing real-time payments found that 77% of respondents reported a beter customer experience. Fifty-four percent said that real-time transactions helped alleviate the challenges surrounding urgent overdue payments, and 32% said it made cash flow easier and safer. Consumer surveys support this analysis, with one PYMNTS Intelligence report finding that 61% of millennials and 59% of bridge millennials say they are highly interested in real-time payments.

    Hope Hacker

    Hope Hacker

    Assistant vice president

    [Real-time payments] help us provide a competitive market position. We can make sure we’re getting the vendors secured to do the repairs for our customers if we’re able to pay our vendors faster.

    30% of customers prefer not to pay extra for real-time payments.

    A recent PYMNTS Intelligence report reveals that these customers would rather leverage slower payments if it means saving money. It also uncovers a number of other concerns surrounding real-time payments: 34% of consumers surveyed worry their payer could mistakenly deposit funds into the wrong account, while 26% express concerns about the security of their funds, and 21% do not trust instant payments offered by certain service providers.

    Finance and insurance companies must address these concerns if they wish to encourage usage among their customer bases. Worries about fees can simply be alleviated by eliminating those charges in the first place. Other concerns will need to be assuaged by constant communication to dispel harmful myths about real-time payments.

    Insurance and Finance Companies Deploy Faster Payment Offerings to Meet Customer Demand

    With consumers showing a willingness to switch financial institutions (FIs) and insurance carriers to meet their payment goals, firms are tuning in to these demands and implementing real-time payment options en masse. The proactive approach helps them both outpace the competition and hold on to their customers.

    Victory Insurance recently delivered near-instant payments for its policyholders.

    The firm adopted Insurity’s Sure Claims Payments platform, which provides a digital experience for payees and processes payments as quickly as 30 seconds after approval. It also offers a “fallback to check” system to prevent late payments and penalties from claimants and vendors by automatically shifting to paper payments in the event of a failed digital transaction.

    With a survey revealing that more than half of the respondents who switched insurance carriers in the past year did so for faster claims processing, Victory is clearly targeting this consumer majority.

    Credit Unions

    CUs are leading the charge in real-time payments, with support from industry organizations assisting in their implementation.

    Corporate One Credit Union and CU*Answers partner to facilitate easier access to real-time payments.

    The partnership aims to simplify the integration process between The Clearing House’s RTP® network and credit unions, an endeavor some FIs have found challenging to complete with their existing resources and staff. The new system aims to be “plug and play” through a simplified application programming interface (API) connection, allowing the RTP network to swiftly onboard new credit unions. According to Corporate One, six credit unions have already started the process of joining the RTP network via this collaboration.

    Insurance and Financial Firms Must Adapt to Customers’ Preferences for Real-Time Payments

    Customer loyalty is crucial for every business, but especially for FIs and insurance companies, which can play a critical role in their customers’ lives, particularly in times of need. Delivering instant payments can go a long way toward securing that loyalty. Whether a bank customer needs paycheck funds to cover an unexpected bill or an insurance policyholder needs a payout for urgent home repairs, companies that provide their customers with instant access to funds will leave a lasting impression.

    However, firms looking to provide these real-time payments must align them to customer preferences. With a significant proportion of consumers unwilling to pay extra for these transactions, free real-time payments are likely the most effective solution to improve payouts for finance and insurance companies.

    Hope Hacker

    Hope Hacker

    Assistant vice president

    [Insurers] position cash daily, and we have very small margins. We can’t leave excess money sitting idle. Whether it’s inbound or outbound payments, we need to be positioning that [money] 24/7.

    About

    The Clearing House operates U.S.-based payments networks that clear and settle funds through ACH, check image, the RTP® network and wire transfers. The RTP network supports the immediate clearing and settlement of payments along with the ability to exchange related payment information across the same secure channel. Learn more at www.theclearinghouse.org.

    PYMNTS Intelligence is a leading global data and analytics platform that uses proprietary data and methods to provide actionable insights on what’s now and what’s next in payments, commerce and the digital economy. Its team of data scientists includes leading economists, econometricians, survey experts, financial analysts and marketing scientists with deep experience in the application of data to the issues that define the future of the digital transformation of the global economy. This multilingual team has conducted original data collection and analysis in more than three dozen global markets for some of the world’s leading publicly traded and privately held firms.

    The PYMNTS Intelligence team that produced this Tracker:

    Managing Director: Aitor Ortiz
    Senior Writer: Andrew Rathkopf

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