When it comes to international assistance, delays in payments between a payer and provider can spell trouble. Therefore, having an efficient global payments solution is as much about having a solid relationship with a healthcare provider as it is about protecting an insurer’s bottom line. Elsewhere, speedy payment services that deliver emergency cash directly to policyholders can be a godsend for travellers in a tight spot. Knowing this, ITIJ set out to explore the key factors to be mindful of when making and receiving global payments for international insurance purposes, and why working with international payments specialists could help the industry avoid potential pitfalls.
Not all global payment solutions are created equal
The most important factors to consider when making and receiving global payments on behalf of any business – from an international payment provider’s perspective – are security, compliance, and adhering to the regulations of the countries in which it operates. Western Union Business Solutions’ (WUBS) Mathew Pounder, who is Senior Business Development Manager for the company’s UK Payment Solutions arm, noted: “At the same time, [you should] ensure that payments are made quickly, efficiently and are fully trackable.” WUBS is Western Union’s B2B/B2C arm of the business. Having acquired Travelex Global Business’s Payments Division back in 2011, the company now has a UK presence providing global payments solutions to WUBS customers and legacy Travelex customers, including medical providers and policyholders on behalf of international travel insurers.
Pounder noted that as banking regulation and payment formatting differs from country to country, this can result in delays, or, in a worst-case scenario, payments being lost and not paid at all. The knock-on effect of which is further delays, increased costs, and poor customer experience, he says. The issue at hand is that not all global payment systems are reliable, and some legacy systems might not be up to the challenge. “Many of our existing clients in the travel/health insurance and related services industry find that their in-house systems are old and inflexible, or the links between their operational and finance systems are difficult to adapt to deal with different currencies at both the front and back end,” said Pounder. “This can cause duplication of work, delays, and reconciliation difficulties.” But reliable and streamlined global payment solutions offer upfront bank and payment validation, helping reduce the number of lost/failed payments thanks to system verification and validation services.
Keeping the policyholder happy
As travel insurance and IPMI industry expert Carl Carter told ITIJ, over the last 20 years, there has been a dramatic increase in the range of options available to international travel insurance and IPMI providers – and their third-party agents – with regards to the array of methods for making global payments to both claimants and medical facilities. For claimant payments, Carter explains that some of the key challenges often arise when these individuals are not set up for, or used to, receiving global payments, or where their bank is ‘local’ rather than ‘international’ – and so the receiving bank charges the policyholder for receiving inbound foreign currency. “Not all banks are equal, especially when it comes to receiving money cross-border, and there is still much work to be done by insurers during the claims process to ensure a choice of payment options is available, that the claimant is aware of how funds will be despatched, and to be aware of the fact that they may receive charges locally,” Carter said. In the last five years or so, however, he notes, there has been a growth in the range of solutions available to counter this issue. These include the ability to provide policyholders and claimants with ‘branded’ zero-balance credit cards that can receive claims funds immediately upon approval from the claims handler, or being able to have funds deposited directly onto a credit or debit card, he says.
The challenges of local currency conversion
Like Carter, WUBS’ Pounder also identifies currency capability as an ongoing challenge for some international insurers and assistance providers: “A business or clearing bank wouldn’t have a direct network to a wide range of currencies, because that isn’t their primary business purpose, whereas a specialist international payment provider does, and it would also be considerably cheaper. A larger range of currencies means they can send money to more locations, more quickly and at a lower cost.” Being able to pay a provider in their local currency is of the utmost importance. Europ Assistance’s (EA) Chief Financial Officer Philippe Gervais explains that this is one of the reasons why EA has an international network of subsidiaries. An insurer’s ability to ensure proximity to a local healthcare provider is an important factor when implementing successful global payments solutions – especially for an international provider with a large global standing. Insurers, he says, need to pay medical bills in the local currency, and it helps to do it as quickly and efficiently as possible. Soraia Arroyo Lynch, Vice-President of Networks at US-based cost containment and medical case management firm GMMI, added that having a global payment partner that supported the company with its payment needs has been imperative to GMMI's success, especially as she tells ITIJ: "Payment integrity is at the heart of what GMMI does." She continued: "We work closely with our vendor to navigate difficult markets to deliver payments (ie. LATAM, Caribbean and certain Asian countries). Without local banking relationships and expertise, payments can be delayed and often times returned."
Protecting against currency exchange rate fluctuations
An issue that all international insurers face is volatile exchange rates, from which they could be protected by having in place a secure global payment solution that is more than just a currency conversion system. Pounder said: “For insurers, volatile exchange rates can mean significant reserve movements from one month to the next. Over the course of a year, with multiple payments being made across many currencies, any exchange rate volatility can have a significant effect on reserves and therefore result forecasting.” And Lynch warned that Covid-19 has had a direct impact on currency volatility around the world. But there are ways to mitigate this. For example, Pounder notes that payment solution providers can offer the ability to forward-buy currencies (known as ‘hedging’), as well as lock in exchange rates for a period of months on certain products, allowing companies to budget and forecast more accurately. A hedging service is also embedded within EA’s in-house clearing tool, which enables the firm to offer crucial protection against currency exchange rate fluctuations.
Pass the parcel (of cash)
Beyond currency conversions and exchange rate volatility, when sending payments across borders, there is also the issue of transaction fees, as well as concerns surrounding currency restrictions or controls in place at specific destinations, Carter says. Pounder added: “The fees through banks and non-specialists can vary depending on the destination and the method of payment. Sending tens of thousands of payments can result in significant fees being charged.” Pounder also identifies the ‘common problem’ of payments being ‘clipped’. “This means that a payment received by the beneficiary is not the full amount that was sent, and this usually happens when a payment has to go through intermediary banks along the way who take a percentage of the transaction in order for it to pass through their network,” he explained. EA’s Head of Global Medical and Travel Networks Eric Barthelemy also touches upon issues surrounding payments being sent through multiple channels before reaching the provider: “When you pay from 30 companies to almost 200 countries in the world, there are a lot of intermediaries that need to be taken into consideration,” Barthelemy said. “And this is where the strategy of payment is key. Because, at the end, there is a cost and an easy-to-work with approach, which is very important in our negotiation with our agents.” Gervais tells ITIJ that EA has a network of agents that are under contract with the firm to pay local facilities on EA’s behalf according to the rules stipulated by EA. EA pays the agents, and the agents pay the local providers, with compensation. “We act as a group compensation chamber,” said Gervais. “So, locally, the payment is done by our agent subsidiary, and then, centrally, we compensate very frequently [in a matter of days] via our self-sufficient tool.” Barthelemy noted that this quick and timely system was very important for an international assistance company like EA, as it meant that its agents do not have to absorb too much cash in advance on the assistance company’s behalf. And it’s important to keep those agents happy. For EA, having agents on the ground is key to ensuring that the company is able to immediately compensate providers at the right price – a central pillar to maintain positive relationships with its providers.
Inter-banking complexities and local compliance
Still, money isn’t the only guiding factor when it comes to integrating effective global payment solutions. Issues of compliance also need to be taken into consideration when paying providers in different countries with different currencies, said Barthelemy: “Clearly, you won’t pay in dollars in Cuba. This is very obvious, but also very important, and the rules can change. “Some regulations can happen, and we need to adapt to that and make sure that EA is not breaking the rules concerning international payments globally.” EA makes sure that its global payments solution ensures that the payer – as well as the provider – is acting in compliance with local and international customs. In this way, an effective global payments solution is also a key part in helping identify and mitigate cases of fraud. Following on from Barthelemy’s point, Gervais told ITIJ that EA has a team that conducts internal audits on payments, as well as reviewing the firm’s dealings with providers in different countries. “It’s quite powerful, as it helps spot the weaknesses and secure the whole global payments process,” Gervais explained. He added that the whole audit setup ensures that the solutions are safe (the system checks the international banking number of the different providers), that there is no fraud, and that there is compliance across the board. Furthermore, EA also uses a screening tool to help mitigate medical provider fraud problems. “Because every country has its own set of blacklists … we need to check the identity of the providers, we need to check their compliance with local rules, and make sure that they are not on that list. So, we have a set of criteria that we run on a daily basis,” Gervais said. Pounder tells ITIJ that Western Union has spent over US$1 billion in compliance-related functions over the past five years, and it makes up 20 per cent of the business’ workforce. “Every payment that goes through our network undergoes automatic sanctions and anti-money laundering checks, as well as anti-fraud screening,” he said.
The payoff is easily worth the cost
“There is a whole set of restraints when it comes to implementing a successful global payments solution: it has to be fast, it has to be reliable, it has to be compliant, it has to be simple for everyone, and it has to protect against fluctuations in exchange rates,” summarised Gervais. “[Effective global payment solutions] don’t necessarily help you save a lot of money, but it’s way cheaper than if you don’t do it.” Indeed, an effective global payments solution is worth its weight in gold: the reduced likelihood of fraud and currency conversion losses, in the long run, weigh up well against the overall cost of integrating a reliable and up-to-date global payment solution system. And of course, global payment solutions help international insurers strengthen relationships with providers and policyholders, where the keys are speed, and that the payment is to the full amount, as Pounder says. What's more, GMMI's Lynch says that ensuring reliable, timely payments to providers also helps secure preferred rates with medical providers, not to mention the fact that it is an overall good and ethical business practice. Carter adds that swifter claims payment services can often be used as a ‘key selling point’ and a ‘way of gaining competitive advantage over alternative providers that may rely on slower and more traditional methods of making their global payments to both customers and providers’. And Lynch further expounds this point, reasoning that a company's ability to remit funds quickly and accurately (at home or globally) is key to its reputation.
So, what’s the overall message here? Ultimately, international insurers need to be vigilant about ensuring that what solutions they do have in place meet their specific needs. Better still would be that the international payment solution complements the needs of the provider that they are working with, as Bathelemy pointed out. “With so much money at stake, and so many complexities, it is crucial that insurers and their associated administrators have a strong and collaborative relationship with their payment provider,” said Pounder. He added: “It is essential that this provider properly understands its clients' business and can adapt to their international payment needs on a daily and ongoing basis.” And that, dear readers, is something you can take to the bank.