How to get low cost payments in insurance, Use Open Banking

With inflation running at around 11%, both insurer and insured are going to be looking for where they can cut costs and save on collecting and making payments. Whether it’s mid-term adjustments, pay-outs premium payments, how can insurance companies control their costs, take advantage of low cost payments and still give good customer service? The answer is Open Banking. Open Banking payments give insurers instant payment, automatic reconciliation and low cost payments as standard.  

In this blog:  

• What is Open Banking?  
• What are the benefits of Open Banking payments to the insurer?  
• What are insurance use cases for Open Banking payments? 

What is Open Banking? 

Open Banking is instant payment, cloud native, secure technology provided by FCA authorised FinTechs. FinTechs, like Ordo, provide innovative payments services for businesses using the UK’s online and mobile payments scheme, the Faster Payments rails, to transform payments, giving businesses low cost payments, instant payment and automatic reconciliation. Open Banking services offered as fully hosted and managed, such as Ordo’s, provide insurers with low cost payment solutions that enable payments collection from their clients at significantly lower direct cost, requiring less resource to reconcile, and less risk than other payments methods like cards, cheques and bank transfers. Open Banking payments come with all this, whilst also giving clients more control over their finances than they have with direct debit.  

Open Banking services are cloud hosted secure payments platforms and APIs allowing insurers to initiate payments requests for contact centre, billing and invoicing, mid-term adjustment fees and e-commerce payments. These Open Banking payments solutions come with web and app-based frontends to allow any end payers using mobile or internet banking to authorise and pay the payments requests directly to the insurer, with instant payment being made directly from their bank account to the insurer’s bank account, without any sign up, registration or app download.  Access to Open Banking payments could not be easier.  

What are the benefits of Open Banking payments to the insurer? 

The COVID pandemic continuing the Brexit challenge to the UK economy, followed by the cost of living crisis, a downturn if not recession and the Russian war on Ukraine are all putting strain on UK insurers and their clients. With consumers tightening their belts and cutting discretionary payments, Ordo’s user research revealed that 80% of people are worried about money and are looking for how they can get the most out of their payments, juggling and retaining essential and low cost payments above regular unchallenged direct debits that go out of their account automatically. Personal financial reviews resulted in 40% of people cancelling some direct debits….and not reinstating such payments. 

Insurers need to demonstrate how they’re giving their customers low cost payments whilst maintaining service and cover levels. To survive, insurers need to urgently adopt Open Banking.  

How do insurers benefit from Open Banking payment solutions adoption?  

• Low cost payments versus cards – Open Banking payments are a minimal single flat fee per payment as opposed to ad valorem on the value of payments, like cards. Insurers can save up to 80% on their payments costs; especially useful for higher payments such as annual premiums, or mid-terms adjustments.  
• Automatic reconciliation – Open Banking payment solutions providers populate the payments requests on behalf of the insurer, and present these as payments to be authorised by the insurers’ customers – there’s no inputting of account details or references by the client. These payments details are not indelible, meaning instant payment is received into the correct account with automatic reconciliation guaranteed. The payments received, via the Faster Payments rails, by the insurer, carry through the payments references inputted by the insurer and will be credited to the insurer’s nominated bank account, eliminating misdirected payments with automatic reconciliation as standard, negating intensive human resource manual interventions.  
• Instant payment – unlike receipt of card payments which take multiple working days to be received by payments collecting insurers, with Open Banking payments, the insurer receives payments directly into their bank account as soon as payments are authorised by their customers. Open Banking payment solutions mean real time payments, allowing insurers to extend cover immediately, knowing they’ve already received the payments: No payments delays, no chargeback risk, and no payments clearing and settlement delays.    

These Open Banking payments benefits give insurers significant cost control over their payments without compromising customer experience. As well as Open Banking meaning low cost payments for insurers, there is the easy integration design of Open Banking services like Ordo’s, using modern business service level APIs, meaning low cost payments and low integration and implementation costs. Using a fully hosted and managed service like the Ordo Open Banking service means integration can be completed within days, after which you can be sending own branded payments request to clients, making savings on your payments, by using Ordo’s white labelled Open Banking service, right from the word go. Once the payments are authorised by clients, insurers receive instant payment into their account which lands with automatic reconciliation.   

What are use cases for Open Banking payments for insurers? 

Annual insurance premium payments collection using Open Banking –  

1. In advance of the due date, the insurer sends requests for payments through an Open Banking API for each customer (payments requests include: payments amount, bill description, automatic reconciliation reference, any attachments eg policy and client email or mobile);  

2. The insurer, or the Open Banking provider on their behalf in the insurer’s branding, sends a secure message by email, text, WhatsApp, post or other means to their client, which includes clearly identifying the insurer giving the client confidence of the insurer’s identity, and an Open Banking secure, tokenised, personalised link from which the client can authorise payments. There is no registration, app download or sign up needed with Ordo to be able to make payments via Ordo’s Open Banking service.  

3. Once the client has clicked the secure tokenised link in the notification message, the client is shown the payments request and the attachments. The client selects the bank they want to pay from where they are taken through their usual bank login process (finger or face ID) and can view the Open Banking payments that have been set up for them ready to authorise. The client enters no payments information: a convenience for them, allowing the Open Banking provider to offer automatic reconciliation to the insurer.  

4. Upon successful authorisation of payments by the client, using web hooks, the Open Banking provider updates the insurer via the API with certainty to confirm receipt of irrevocable payments – the cleared and settled payments which will be automatically reconciled in the insurer’s bank account. With this confidence of irrevocable payments received, the insurer can take the customer on risk and begin providing cover. 

Mid-term adjustments using Open Banking payments –  

Payments requests can be created and paid as part of the insurer’s e-commerce offering, in the insurer’s own branding and on their own web site, or can be initiated by the insurer’s call or contact centre by an agent during a client call – Open Banking payments will be received as instant payment and will be automatically reconciled before the call centre call is concluded….all with costs savings to the insurer, a truly low cost payments solution for insurers.  

Make finding cover for your profits a priority today; adopt payment solutions that guarantee you low cost payments from the start, integrate Open Banking and be comprehensively covered.