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Best Practices

3 Steps to Maximum-Confidence Payments for Retirement and Insurance Companies

FinLync | September 16, 2022


Each finance team is unique in its challenges, priorities and goals. But retirement planning companies and insurance companies have some special operational needs that set them apart. Beyond the normal day-to-day operations and KPIs, finance teams in these industries must process a massive volume of payments to consumers. Governmental agency oversight to ensure adherence to efficient operations increases the pressure on these finance teams.

Why these payments are important

From the recipients’ perspective, payments and distributions from investment and retirement accounts are important. Like payroll and social security payments, the recipients of these types of payments use the money for living expenses – critical bills like heat, electricity and medical care. A delayed payment of this kind could result in a missed meal, missed medical prescriptions, an eviction, or worse.

From the retirement or insurance company’s point of view, besides caring for their clients’ well-being, there are significant regulations that dictate how quickly these payments must be sent out.

With finance teams rapidly advancing to bank API connectivity, there are tremendous benefits across nearly every KPI, operational area and even at the strategic level of finance. But a key pain point for insurance and retirement companies is having absolute certainty that a payment sent to a client has been successfully received and with these finance banking initiatives, bank APIs make maximum-confidence payments a reality.

Read The Hackett Group paper: Why Treasurers should care about bank APIs

The current state of workaround

With legacy technology, the current state is a workaround leaving finance teams guessing.  At best, there’s a somewhat-automated process  that looks something like this:

  • Step 1: a file is automatically generated and written to disk
  • Step 2: the file is encrypted
  • Step 3: the file is then delivered via some middleware or transmission protocol to the bank
  • Step 4: Bank protocol then begins to consume the file and perform initial checks
  • Step 5: Bank writes out an acknowledgement file
  • Step 6: the bank initiate a similar protocol to send this file back to the corporate which initiated the payment.
  • Step 7: The payment initiator has a protocol running looking for these files
  • Step 8: Once identified, the corporate’s protocol consumes and updates just the initial status of the payment indicating whether the bank has received the file.

This process continues to run waiting for the bank to send further status updates that it has processed the file to end the story for traditional payment tracking.  A web of interdependencies based off communication that has two parties constantly out of sync.

Step 1: Validate accounts in advance, instantly

Rather than waiting until a payment needs to be made, bank APIs allow finance teams to validate the settlement instructions of the investor/client ahead of time, without the need for bank files and without the lag time of bank files. Bank APIs do this by enabling instant, on-demand communication with banks and other financial partners to check all payments against various databases and ensure the highest level of certainty.  Unlike file-based methods, with bank APIs, the utility expands to one-off payments because the communication is instant.

The result? A dramatic decrease in failed payments.

Step 2: Initiate and track payments in real-time

Real-time payments become real life with bank APIs connectivity. Finance teams can go from payment initiation to proof of payment receipt in minutes. As for tracking the payment once it has been sent? Bank APIs transmit data in real-time, so insurance companies and retirement organizations have total payment traceability – at every step from initiation to beneficiary receipt – just like a package tracker.

With this advancement, rather than a recipient waiting days for a paper check to arrive, or a day for an ACH, payments can be delivered immediately. For insurance companies working with claims related to a disaster, or for a family depending on a retirement distribution to put dinner on the table that night, the speed truly matters.

And finally, gone are the days of waiting for acknowledgement files telling you a payment has been sent. Corporate finance has now entered the era of proof of receipt as the new standard – made possible by bank APIs.

Payment traceability diagram

Read The Hackett Group paper: Why Treasurer’s should care about bank APIs

Step 3: Combining Positive Pay and Bank APIs

Forward-thinking finance teams are combining the power of positive pay and advancing to bank APIs to achieve maximum-confidence payments.

How? Bank APIs transmit an insurance or retirement company’s positive pay data for checks being written in-house. Once sent to the bank, this positive pay data – essentially a list of checks that were printed – can be used to validate against checks that have been deposited.

The result? Total confidence for which payments have been successfully received, and a clear picture of the payments that have not yet been deposited or processed.

An added bonus: No bank files to manage and process.  Bank APIs are a technology that moves data securely between a corporation and its bank partner(s). Unlike legacy bank connectivity channels like host-to-host and SWIFT, bank APIs deliver synchronous communication with your bank partners.  You see, every communication via bank API is a handshake between the bank and the corporate where both exchange information simultaneously. Two questions are answered with every ping on the API:

  1. Was the other party reachable?
  2. Does this message contain what you need?

On question one, API technology provides high availability, so the answer is overwhelmingly yes. On question two, it’s a simple yes or no answer. Positive or negative, black or white. No more guessing or speculation as to whether the corporate and bank are on the same page.

For finance teams, never having to ask “where’s the wire?” again is priceless.

And, there are no bank files involved, which dramatically reduces the finance team’s time spent on formatting, organizing, processing and waiting on bank files.

BONUS: Bank APIs also enable instant reconciliation.  Not just automating the process.  Accelerating it. By pairing artificial intelligence and machine learning with bank APIs, reconciliation begins the moment a transaction hits the account – a crucial advantage for retirement and insurance companies with massive volume.



Advancing to bank API connectivity has tremendous advantages for any finance organization, but the benefits for retirement and insurance companies are particularly clear. Getting started with bank APIs doesn’t have to be all-or-nothing. In fact, many companies begin by advancing to bank APIs with their “lead dog” bank or banks, and then phase in their other banking partners one at a time. The advantages of real-time bank data can be instantly felt by the organization, and for those on the receiving end of payments.

Hackett Group Blog


Mitch Thomas

Head of Solution Engineering - North America