ICE Bank of America Presentation 10-23-07 FINAL-V2
ICE Bank of America Presentation 10-23-07 FINAL-V2
Agenda
Introduction Credit Card Players, Debit Card Players Costs of Credit Card, Debit Card Acceptance PIN-less Debit, What is it?, Costs Current Landscape Benefits Payment Methods Growth Opportunities Merchant Marketing Technology/Implementation Options Questions/Comments
Introduction
Major trends in billing and payment technology in the insurance industry:
Increase in electronic presentment and payment Increase in credit card payment Decrease in check payments
Payment card growth is slowing in the most mature bill payments segments telecommunications and cable/satellite/ISPs while growth remains healthy in the insurance and utility segments.
2% to 5% Merchant Processor
Example Cost Calculation for $10,000 Visa Insurance Premium Payment from Level 3 Corporate Card Customer $10,000 Insurance Premium= $130.00 in Interchange fees (paid to issuing bank) + $ 6.93 paid to Visa + $ 10.00 paid to acquiring bank processor $146 .93 in total cost (1.46% effective rate)
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PIN-less Debit
Allows ATM/Debit cardholders to pay bills at bill payment merchant
Web site Voice response unit (VRU), Live customer service representative or call center Recurring payment
Transactions are processed online, in real time Transactions limited to biller categories that fit a specific low-risk model (utilities, insurance, telecom, financial institutions) Bill payment merchant assumes the transaction liability and is responsible for authenticating cardholder at time the transaction is initiated
Source: First Data : Real-time Debit Alternative Payments STAR PIN-Secure & STAR Bill Payment
PIN-less Debit
Insurance is a core category for the STAR Bill Payment Service. Nearly 15% of total transaction volume comes from insurers.
558 billers 89 new in 2007 78 insurers
Approval rate for STAR Bill Payment is 90%. Research shows that when asked what type of card they would prefer to use to make a bill payment, consumers selected debit cards over credit cards by nearly a 5-to-2 ratio.* More than one-third of consumers say that they would pay more bills electronically if they could use their debit cards.*
2007 Consumer Payments Preferences and Usage Study; Phoenix Marketing International / ESP Payments Practice Source: First Data : Real-time Debit Alternative Payments STAR PIN-Secure & STAR Bill Payment
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AS1
Slide 11 AS1
Aaron Schneider, 10/15/2007
Current Landscape
Bill payment volume is a sizeable opportunity with volume concentrated in insurance, utilities and telecommunications
Consumer Bill Pay Sales Volume* $953 billion (CY05)
Other Cable/Satellite/ISP
8% 9% 34% 34%
Insurance Utilities
5% 9%
Insurance
Property Management
11% 18%
11% 12%
36%
Telecom
Telecom
20% 20%
Utilities
28%
Life/P&C Insurance
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Source: Visa U.S.A. PIC Analysis * Represents bill payment portion of segment volume only; totals may not sum due to rounding.
Commercial Insurance
Can policyholders send payments via Web site?
Yes 47% No 53%
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Commercial Insurance
Methods of charging credit card fees
Do not offer credit card payments 44% Do not charge fees on credit card payments 11% Charge standard installment fee 39% Discount standard installment fees 0% Charge more than standard installment fee 6%
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Current Landscape
Online bill payments accounted for 39% of bill payments among online households in 2006, an increase of 4% from 2005. Volume of checks sent by mail fell 4%, accounting for only 34% of the volume of payments. Consumers paying at least one bill online per month rose to 74%, compared to 69% in the previous survey. Consumer adoption of online bill payment has more than doubled since January 2002, when 37% of online households reported paying at least one bill online. Half of property/casualty insurers are currently offering electronic bill presentment and payment to their policyholders, and nearly half have it for their agents.
Source: The 2007 Consumer Bill Payment Survey, a study by Harris Interactive Inc. and The Marketing Workshop Inc. Source: 2006 Celent report, Billing: Business and IT Issues for P/C Insurers.
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Benefits
Benefits to your customers: Choose from multiple methods of payment Take comfort in knowing payments are fast, reliable and secure Rewards (frequent flier miles, cash back, ease of accounting) Addresses most consumer security concerns Speeds up time to statement
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Payment Methods
Cardholders demonstrate a desire to pay through various channels, indicating opportunity in both the biller direct and consolidator models Example of biller direct is a merchant who allows payment directly on the merchants Web site Example of consolidator is a third-party vendor who accepts the payment on behalf of the merchant Advantages of consolidator include ease of implementation, speed of implementation, less compliance liability Disadvantages of consolidator include loss of control
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Payment Methods
While card acceptance has grown, most Visa cardholders use multiple methods to pay bills.
82%
Send checks via mail
13% 24%
Use all three methods
52%
Use online bill pay at bank Web site
35%
12%
75%
Pay by biller-direct*
* Pay directly to biller by payment card or EFT from checking or savings (online or by phone) Source: Visa U.S.A. Research Services, 2006
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Growth Opportunities
Statistics reported from a top 5 insurance company (based on revenues)
Approximate of overall payments (amon all types of insurance) paid via credit card
13% 11%
ard redit
9% 7% 5% 3% 1% 2006 2007
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95% 90% 85% 80% 75% 70% St andard & N on-St andard Aut o H omeowners 7 7
Type of Insurance
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Growth Opportunities
In terms of credit card acceptance, this top 5 insurance company reported their credit card growth rates over the past three years are as follows: 2005: 29% growth 2006: 30% growth 2007: 13% growth (year-to-date)
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Insurance Inserts
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BillPay Marketing
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BillPay Marketing
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Merchant Marketing
Biller (merchant) marketing of Visa Bill Pay generated more than 180 million direct marketing impressions in the last year. Participating marketing partners within the insurance industry included Farmers Insurance and St. Paul Travelers Insurance. In the retail (non-bill payment) marketplace, there is minimal amount of growth potential for payments. Visa, MasterCard, American Express, Discover, STAR, NYCE, PULSE, and many of the major issuers are all focused on increasing the amount of bill payments paid via credit card, debit card. These companies are going to more aggressively market bill payment to consumers who are going to request bill payment capabilities from insurers. Marketing will include television, Web, statement inserts, magazine and other forms of media. Incentives are being increased to push consumers in this direction. What is the message to pass to your customer service agents who will be taking calls from customers that want to know, can I pay with my credit card?
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Questions/Comments/Discussion
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Thank you
Aaron Schneider, 1.954.558.0252 [email protected]
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