Paymentech, the nation’s third largest credit card processor, is launching recurring credit and debit card payments for major life/health and property/casualty insurers. The new business signals growing interest in new electronic payment options that allow consumers to conveniently pay their bills. Paymentech projects almost two million transactions annually once all programs are fully underway.
Some of the programs also include processing for one-time payments for agent sales, phone transactions, and web site applications. Paymentech?s processing menu includes credit card, debit card and automatic checking account deduction.
Paymentech?s direct response unit is highlighting automated recurring bill payment programs for the insurance industry at the Insurance Accounting and Systems Association conference in San Diego. With recurring payments, consumers pre-select a credit, debit, or electronic check option to cover regularly scheduled automobile, property/casualty or life insurance premiums. Customers receive statements for their review and records.
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For recurring payments, Paymentech interfaces with billing systems to extract a file of non-check payments for authorization and settlement, including those that directly debit a bank account. Insurance providers electronically collect receivables, reduce the payment cycle time, and access funds sooner. Lock box, collection agency and insufficient funds bank fees are also reduced. Insurance companies believe customers find credit cards more convenient. There are no checks to write, stamps to buy or statements to return. Recurring payment programs can also be used as tools for building consumer loyalty. Responding to MasterCard and Visa market research, Paymentech, the largest processor for card-not-present payments, created programs specific to the insurance industry. ?Over half of the top 20 insurance companies offer some type of credit card acceptance,? said Gary Beck, senior director for recurring payments at Paymentech. Research also suggests that credit card usage can help close initial sales and reduce walk-in payments.
?Credit cards currently account for 5% of all premium payments. Automated monthly or quarterly payments will increase that,? said Beck. ?MasterCard research shows that 34% of consumers favor automatic recurring payments and that 82% of service companies cite customer service enhancements as the key reason for offering recurring payments.?
Paymentech, Inc., founded in 1985, is the third largest processor of bankcard transactions and a leading issuer of commercial cards in the United States The company processed approximately 2.2 billion total transactions and $54 billion in sales volume during calendar 1998.
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Paymentech Recurring Payments Fact Sheet
Recurring payments (RPs) account for over $500 billion in annual payments. Less than 2% is currently captured on cards. Approximately 5% of payments are made through direct debits of consumer checking accounts. (Nilson Report, August 1996) According to a MasterCard survey, 93% of all recurring bills are paid by writing a check, however, 36% of consumers currently use some type of recurring payment method for at least one bill. Automatic payment type preferences were
– automatic checking account debit (electronic check processing)
– automatic paycheck deduction
– credit card recurring
– 34% of consumers (not currently using) would prefer a recurring payment
– about one in four consumers mentioned they would switch to a
competitor if that company could do automatic recurring payments
Insurance Industry Statistics
– total annual premium payments for homeowners, auto and life insurance is
– credit card volume accounted for about $767 million
Benefits of RPs
Merchants (service industry providers):
– secure transactions
– streamlined processing
– improved collections
– improved customer service and retention
– incremental sales
– convenience, saves time and money
– option to revolve
– earn points in co-branded and frequency award programs