Future-proofing payments in the insurance industry

The financial landscape in Australia is on the brink of a monumental shift, driven by mandatory regulatory changes. For instance by 2030, the Bank Exchange Clearing System (BECS)—the workhorse of the Australian payments infrastructure for decades—is scheduled to be decommissioned.

This transition isn’t optional; BECS is being replaced by modern, real-time payment platforms that prioritise instant, seamless transactions. For the insurance industry, this change marks a significant turning point.

The transition to real-time payment platforms poses both logistical and strategic challenges for insurers. Legacy systems, with their slower processing speeds and operational limitations, will become obsolete, requiring insurers to overhaul their payment infrastructure. Such a transformation is not only complex but also time-sensitive, as product development cycles and technology upgrades require years of planning and execution.

However, this challenge also presents an opportunity. Early adopters of real-time payment solutions stand to gain a competitive edge by delivering superior customer experiences, enabling instant premium collections and faster claims processing.

On the other hand, insurers who delay action risk falling behind competitors who are already aligning with the future of payments. While the timeline may seem in the distant future the window for preparation is rapidly closing, making it critical for insurers to act now.

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Enhanced customer experience creates better business outcomes

Incorporating real-time payments into the insurance sector is about more than just compliance—it’s about delivering superior value to both customers and insurers.

Adopting real-time payment solutions enables insurers to deliver rapid claims payouts, directly addressing a key pain point for customers like delays in receiving funds when they need them most. By eliminating the inefficiencies of traditional payment systems, these solutions ensure that claim settlements are processed instantly, reducing the stress and uncertainty customers often face during critical moments.

Beyond improving customer satisfaction, this capability enhances trust and loyalty, while also driving business growth by streamlining the payment experience and reducing drop-offs in the claims process.

Unlike traditional card-based payment options, which charge a percentage of the premium, real-time account-to-account transfers operate on a fixed-fee structure. This predictability in costs allows insurers to improve margins and allocate resources more effectively.

However, to truly leverage these benefits, insurers may need to consider customer behavior, their payment preferences, and the operational requirements for implementing these systems successfully.

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Making the shift

The transition to real-time payments requires immediate, strategic action from insurers to meet the rising expectations of today’s policyholders and maintain a competitive edge. To deliver this level of service, insurers must adopt a digital-first approach, rethinking how payment processes integrate into the broader customer experience.

A critical first step is to investigate and test real-time payment platforms like PayID. Incorporating real-time payments into a strategic product roadmap is essential for a smooth transition. Insurers may choose to identify high-priority use cases, such as premium payments and claims disbursements, while developing phased implementation plans. These plans should outline clear milestones, including necessary system upgrades, employee training programs, and customer education initiatives. Starting this process now is critical to avoid disruption as the 2030 deadline for the deprecation of BECS approaches.

Advanced data analytics can also play a pivotal role in this transformation. By analysing payment and transaction data, insurers can identify inefficiencies, customer preferences, and anticipate emerging demands. For example, insights into customer adoption of mobile versus desktop payment channels or the root causes of claim payout delays can help insurers fine-tune their systems for both speed and user-friendliness.

Collaboration with payment solution providers is another key strategy. Partnering with experts in real-time payment technologies allows insurers to access innovative solutions, leverage industry best practices, and streamline their implementation efforts. These partnerships can help insurers remain at the forefront of payment innovation.

Finally, educating both internal stakeholders and customers about the benefits of real-time payments is equally important; internally, this includes discussion on how these systems can reduce operational costs, improve customer satisfaction, and enhance retention. For customers, this includes sharing the benefits to their experience, including speed of processing and/or service, security, and convenience these systems offer, fostering trust and encouraging adoption. Clear and proactive communication will ease the transition and ensure alignment across all stakeholders.

Following these steps can help insurers build faster, more reliable, future-ready payment systems, positioning themselves to thrive in a rapidly evolving financial landscape.

_{"Nothing in this piece constitutes financial, legal or tax advice, please seek advice from an accredited professional for your personal circumstances and needs" .}

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