Push-to-Debit Transactions: Transforming Insurance Claim Disbursements

In today's fast-paced world, the demand for instant gratification extends to financial transactions. According to Datos Insights (formerly AiteNovarica), the total number of payments is quickly increasing, and within that increase, the adoption of electronic payments and faster payments is surging much higher than legacy options.¹ 

In terms of receiving payments, policyholders are increasingly favoring instant debit transfers over traditional methods like checks and ACH transactions. Per a Mastercard report, nearly two-thirds of consumers choose instant debit transfers over checks and ACH payments when given the option.² 

Sometimes called direct-to-card payments, this modern approach allows for claims disbursements to be sent directly to a consumer's debit card, making the process not just faster but more secure. Many business debit cards can also receive push-to-debit payments, although often with limitations on transaction amounts.   

Benefits of Push-to-Debit Payments for Insurance Companies 

Insurers stand to gain significantly from integrating push-to-debit technology into their claims disbursement processes, from reducing costs and improving security to automating reconciliation.  

Cost Effective  

One of the most compelling advantages is cost-effectiveness. Sending payments directly to debit cards eliminates the expenses associated with printing and mailing checks, ultimately saving insurers money. Respondents in RPMG’s 2022 Virtual Card Benchmark Survey reported that a check’s end-to-end average cost is $38.³

Better Security 

Push-to-debit transactions are guarded by robust security measures, including multi-factor authentication and Account Verification Services. These features reduce the risk of fraud and ensure that only authorized parties can manage accounts and receive payments. 

MFA is a multi-step account login process that requires users to verify their identity by providing more information than just a password.⁴ MFA ensures only a member of the payee's organization is allowed to manage accounts receivable.  

AVS performs real-time card account checks with card issuers, including confirming an account is open and valid in addition to verifying the supplied postal code, billing address, and/or Card Verification Code (CVC or CVV).⁵ 

Optimized Processes 

The efficiency of push-to-debit transactions streamlines reconciliation. With electronic communications and attached invoices, companies can maintain clear records of payments, reducing the time and effort required for manual reconciliation. This automated approach allows finance teams to focus on more strategic tasks, enhancing overall productivity. 

Advantages of Push-to-Debit Payouts for Policyholders & Other Payees 

For policyholders and other payees, such as vendors and service providers, the primary benefit of push-to-debit transactions is instant access to their funds. Unlike traditional methods, where there can be a waiting period of several days for checks to clear or ACH transactions to process, push-to-debit ensures that funds are available almost immediately, subject to the policies of the receiving financial institution.  

Mastercard research has shown how much consumers value real-time payments for their convenience and accuracy, with 75% of respondents in a 2023 survey saying they would like all digital payments to be in real-time.⁶ 

Added Convenience 

In addition to being instant, with push-to-debit payments, there is no need to search for bank account or routing numbers as payees can use the 16-digit debit card number and expiration date from their digital or physical wallet. Consumers can then use their debit cards to access their money at any time and from anywhere, offering unparalleled convenience. These benefits also appeal to vendors and providers receiving payouts.  

Lowered Fraud Risk 

Using push-to-debit payments significantly reduces the risk of lost or stolen checks, which can delay claim settlements. By eliminating the need for physical checks, push-to-debit transactions provide a more secure and reliable payment option for payees, ensuring they receive their funds without unnecessary delays — benefiting consumers and insurers alike. 

The Impact of Instant Payments to Disbursements 

Consumers and businesses in the U.S. now have access to instant payment services available 24/7, facilitated by the Federal Reserve’s FedNow, launched in July 2023, and the Clearing House’s RTP (Real-Time Payments) network, initiated in November 2017. This expansion has enabled instant payments to be leveraged for a variety of use cases and applications. For disbursements, instant payments offer customers the ability to receive a large dollar amount payout on any day and at any time.    

As with any new capability, insurers must assess customers’ needs while balancing costs and risks. A comprehensive digital payment strategy should offer multiple options to meet customer demands while reducing check processing and fraud expenses. Ultimately, it comes down to arming people and businesses with choices in how they use and move their money.  

A Continued Push Toward Digital 

Aligning with the broader trend toward instant digital transactions, push-to-debit technology offers numerous benefits, including cost savings, enhanced security, and improved efficiency for insurers, while providing policyholders with immediate access to funds and reducing the risks associated with traditional payment methods. 

One Inc is propelling the industry forward through a unified and frictionless payment experience. By leveraging One Inc’s modern payment platform, insurers large and small are eliminating paper-based workflows and paper checks — raising the bar for speed and security in claims disbursements. 

If you’d like additional information and insights on digitalizing outbound payments, download our whitepaper in collaboration with Mastercard, How Insurance Carriers Can Shred the Cost of Sending Paper Checks: Leveraging the Financial Advantages of Virtual Cards and Push-to-Debit Solutions. 

Delivering More

Are you ready to modernize your payment offerings to do more for your customers? One Inc provides a cloud-based, scalable payment platform that enables innovation and growth. By leveraging our next-gen technology and ecosystem partnerships, we deliver a simplified, seamless, and elegant customer payment experience. With One Inc by your side, continually adding value, cloud-based digital payment success is achievable. Learn more.  

Sources

1. Datos Insights –  https://datos-insights.com/reports/reconciling-receivables-biggest-pain-point-businesses/ 
2. Mastercard – Near Real-Time Access to Funds in a Digital World Report, https://www.mastercard.com/news/ap/en/research-reports/ 
3. RPMG Research Corporation – 2022 Virtual Card Benchmark Survey Results retrieved from https://www.rpmgresearch.net/reports/ 
4. Cybersecurity and Infrastructure Security Agency – https://www.cisa.gov/MFA 
5. Mastercard – https://developer.mastercard.com/mastercard-send-avs/product/avs/ 
6. Mastercard – https://www.mastercard.com/news/perspectives/2023/real-time-payments-what-is-rtp-and-why-do-we-need-instant-payments/