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David Schwartz, Obopay
David Schwartz, Obopay
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Insurers’ Mobile Payments Opportunity, Part I: Competitive Edge

The mass adoption of personal mobile devices has given insurers an opportunity to distinguish themselves from their competitors by speeding payment during the claim process.

New mobile and electronic payment technologies are enabling insurance companies to accelerate their speed of response to claimants, putting money in their customers’ hands right away. Speeding payments can give early adopters a competitive advantage, while improving operational efficiency.

When accidents happen, whether small fender benders or large-scale devastation from natural disaster, customers look to their carriers to get them back on the road to recovery immediately. Ultimately, those customers can be evangelists or detractors. It is largely determined by how quickly and painlessly their carrier can get money to them to fix what has been damaged or broken.

David Schwartz
David Schwartz, Obopay
In fact, how quickly an insurance company performs in someone’s time of need is most people’s only interaction with their insurance company, other than writing them a monthly check for their policy, so it leaves a strong and lasting impression on how an insurance company is perceived by its customers.

The ubiquity of mobile phones and the explosion of smartphone adoption have created a new way of moving money. Banks and telecommunications companies are already putting smartphones to work transmitting money in ways never before imagined. The same technology can now have a similar impact on insurance, enabling insurers to disburse funds in a secure manner in the field. These new mobile payment technologies take advantage of a phone’s built in capabilities including high-resolution cameras and secure, high-speed, cellular data transmission. They also leverage new applications that enable 2D barcode imaging, check image capture, and card-reader terminals for smartphones.

These new mobile technologies when combined with digital payment capabilities can dramatically reduce the cost of issuing claims for an insurance company, and improve customer satisfaction by enabling real-time payments that are instantly spendable by the claimant. Electronic payments can be made into a claimant’s bank account over the automated clearing house (ACH) network, or to their debit card using a pin-less debit transaction (giving the claimant instant access to spend their money), the claimant can be provided an instant issue prepaid card, (which also provides them with instant money to spend).

2D barcode imaging applications can enable an insurance field agent using a smart phone application to capture a 2D barcode image using the phone’s camera; the application can decipher, and securely pass, via the cellular data network, the information encoded in the bar code to an insurance company’s back-end systems for processing. This technology can provide a secure process to associate an insurance claim with a payment by linking the claim information to the fulfillment of a payment made through the smart phone application. Such applications can also rapidly get funds into a claimants hands by using the 2D bar codes to activate and load an instant issue prepaid card which can be distributed by the agent in the field, providing the claimant with instant access to their claim funds.

Check image capture applications enable an insurance agent to use a smart phone camera to take an image of a check belonging to the claimant in order to securely and accurately capture the account and routing instructions of the claimant’s bank account. This data can then be transmitted securely to a payment system that is capable of transferring funds automatically to the claimant’s bank account via an automated clearinghouse (ACH) transaction.

A card reader terminal for a mobile smart phone is a small, light weight, piece of hardware that can be easily plugged into a smart phone either through the audio jack (where the headphone goes) or charger port (where the phone charger is plugged in). When combined with an application these devices enable the smart phone to become the equivalent of a point of sale (POS) card reader, with the same set of capability that a credit or debit card reader has at a traditional store. To provide instant funds, first the agent will swipe the claimant’s debit card to identify if that card is supported for loading funds to the claimant’s own bank account through a supported debit network.

Electronic disbursement to claimants via the debit card payment networks, including STAR, NYCE, PULSE and Visa, can prove particularly valuable and are well suited to disbursements through mobile technologies since they provide real-time payment capabilities. These networks enable funds to be credited to a payee’s own debit card using their debit card number. With these transactions, payees receive funds instantly and securely, in their own bank account.

Claimants often find it easier to locate their debit card number, as opposed to their bank account and routing number, making it an easier option for them to receive funds. To receive the funds to a debit card the cardholder’s issuing bank must support the instant credit transactions which each of these networks now offer. Thousands of banks in the U.S. participate today with the number growing.

Regardless of the means, the most important element of disbursements through mobile payment technologies is that the payee not only receive funds quickly and easily, and but can spend them instantly. This goes a long way toward customer satisfaction.

In part II of this two-part series, I’ll look at how mobile payments can also help insurers to realize sizable cost reductions, as well as how to select the right partner to navigate implementation and deployment.

About the Author: David Schwartz is VP, product marketing, Obopay, Inc., a Redwood City, Calif.-based global mobile payment solution provider.

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