First in a series.
Last year, Fifth Third underwent some organizational surgery to unify its payments operations. Now, the company is prepared to test this new structure by addressing the intricate needs of the health care industry.
Consumer health care payments are notoriously behind the times, due largely to providers' habit of collecting most funds directly from insurance companies instead of consumers, who typically pay a smaller copay at the time of service. But as more patients pay their own expenses as part of high-deductible health plans, hospitals and specialists are challenged to update the way they accept payments and handle related interactions such as billing and collections.
Because Fifth Third is big and diverse enough to confront these many pain points, "we think there is an opening for us to play a role in in the health care payments market," said Randy Koporc, president of enterprise payments and commerce solutions for Fifth Third.
Having combined its treasury management, consumer card, currency processing and other divisions, Fifth Third can now create service bundles that centralize consumer and health care provider payments.
Health care transactions include a mix of business-to-business or supply chain payments, such as insurance payouts and reconciliation between insurance companies and providers; and consumer payments such as copays, deductibles and debits from health savings accounts. Additionally, the consumer's responsibility for a particular payment may change over time, further complicating the transaction.
"Determining who you owe and what people that money goes to is a challenge," Koporc said, adding Fifth Third's new payments unit can route transactions between consumers, providers and insurers efficiently.
Fifth Third's strategy encompasses more than just health care. The bank will also pursue retailers that are developing mobile wallets. Its unified structure allows the bank to offer data analytics and reconciliation alongside merchant services such as sales and marketing performance, Koporc said.
"Banks have thrived on traditional payments in the past," Koporc said, but the various payment activities had been "highly fragmented" under the old organization. "With the Vantiv spinoff, we wanted to look at the convergence of consumer and wholesale payments. Whether it's mobile, issuance, trading, cards, ACH or treasury, we wanted to get one payment system and one voice internally."
That combination should serve the bank well in health care, said Mike Trilli, a senior health care analyst for Aite Group.
"When you look at the changes in the health care market, with regulations and new payment models, there will be a chance to benefit in that market where you can get good synergies between consumer and corporate payments there," Trilli said. "[Fifth Third] may be ahead of the game here."
Banks worldwide are under increasing pressure from startups to offer innovative payment solutions. The new Payments Innovation Jury report found that nearly three quarters of international payment executives believe startups or technology companies are best at driving payments innovation; less than 3% chose banks. In health care, a number of nonbanks are also pursuing the opportunity created by the growth in consumer-direct health care payments.
Simplee, WEX and Payspan are all pursuing the market, mostly through payment card technology. Instamed, another health care payment provider, recently integrated Apple Pay to support mobile health care payments.
Banks can make inroads in the health care space by addressing multiple aspects of the health care ecosystem, Trilli said.
"What we're seeing is the next phase at banks," Trilli said. "They have been good at pursuing the consumer health care payment products, but now they are looking at joining that with the treasury groups."