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Third Party Payment: Now Merging onto the ePay Expressway
July 24, 2012
U.S. Bank Corporate Payment Systems
Insurance and warranty payments are among the last holdouts from the paperless payment revolution. While overall business-to-business payments are steadily advancing toward end-to-end electronic processing, for technical reasons the move has proven more difficult for insurance and warranty payments. There simply has not been an easy way to go paperless.
A major barrier has been supplier enablement. In the case of car repair, for example, auto repair garages would have to be individually “enabled” to receive payments electronically from the insurance company’s bank. Such a process is expensive, time consuming, and impractical.
But what if existing payment infrastructure could be leveraged to exchange information? Newer tools such as U.S. Bank
Online Direct Connect are doing just that. By utilizing connections that already exist, Direct Connect speeds up reimbursement of service providers who handle warranty and insurance claims.
In our example, repair shops are already connected to warranty companies via the Internet. U.S. Bank uses those internet rails to facilitate quick, easy reconciliation and payment. Once a repair is authorized, U.S. Bank sets up a single use account for a specific amount to be paid during a specific time parameter. If time and amount match when the repair shop charges the account, payment is made instantly.
No more asking for a check number, no more waiting for payment to come in the mail. For the shop, there’s no lag time between repair and payment; for insurers, no more paper invoices, paper checks, envelopes and postage; for car owners, no paper invoice to send to their insurer.
The benefits of such a system are many. First, the need to set up each supplier with the proper technology disappears. Second, if there’s a mismatch between what the warranty company agreed to pay and what the shop expected to be paid, it’s discovered right away and can be reconciled on the same day the repair occurs, not weeks into the future. Third, overall cost to everyone is reduced.
The same process can be applied beyond insurance and warranty to other types of third party payment, such as travel reward redemptions and other direct bill redemption models. Today, hotel properties send paper invoices to redemption processors to get paid for travelers who have used reward points. The invoice does not distinguish room rates from incidentals and other expenses; thus “leakage” can occur and the processor winds up paying for items it should not. With Direct Connect, the room can be paid for electronically upfront. At check out, with the rooms already paid for, the hotel can then collect from the traveler the remaining amount for the expenses they incurred.
At the end of the day, electronic payment innovation is about greater control over spending, better visibility for faster reconciliation, improved relations between payers and suppliers, and reduced cost for everyone.
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