Payment System Integration via APIs

For more than 75 years, Madison, Wisconsin–based CUNA Mutual has provided insurance and lending solutions to credit unions and their members. When the company introduced pet insurance in 2018, the goal of the new product offering was to simplify life for pet owners. Affordable monthly premium payments would make pet medical care much easier to fund than the traditional approach of paying for each large and unexpected veterinarian bill out of pocket.

Unfortunately, the pet insurance pilot project revealed barriers to consumer participation. The new business unit had selected a third-party financial technology payment processor to manage customers’ automated premium payments. The service was expensive. Worse, it utilized a cumbersome microdeposit process to validate customer accounts. When consumers signed up for pet insurance online, they had to return later to the CUNA Mutual website to confirm their bank account information.

“We built mechanisms to encourage customers to confirm their microdeposits and resolve their account-verification issues,” says Travis Ellis, treasury consultant in CUNA Mutual’s treasury department. “However, the process was still confusing and problematic, even with our best efforts at automation and explanations. For a pet insurance customer signing up to pay a $15 per month premium, having to enter a microdeposit to validate that transaction does not make business sense, nor does it follow our standard process.”

The multistep process was so burdensome that about 30 percent of customers who signed up for automated payments failed to successfully verify their account. “That was a pretty substantial proportion of customers to lose because our process was inefficient,” says Chris Sonnenburg, senior technology lead in CUNA Mutual’s IT department.

Customers deserved a streamlined payment experience. However, moving the nascent pet insurance business onto the same payment process as the rest of the company did not make sense. Overall, CUNA Mutual processes “millions and millions of payments a month,” Ellis says. “Every night, our different business units’ administrative systems generate batch files and send them to a homegrown system that consolidates them. From there, the payment data is passed to our treasury workstation, which loads the transactions and places them in batches on the job schedule to send to banks.

“All those steps add at least a day to payment processing,” Ellis adds. “If we built a new batch process, we would be doing something backwards technology-wise. We knew there had to be a better way.”

Ellis and Sonnenburg teamed up to rethink pet insurance payments. They wanted to connect online pet insurance subscriptions directly into their treasury management system using an application programming interface (API). They were already using API connectivity with the third-party financial technology provider but hadn’t yet introduced API connections into their treasury management system. They also wanted to replace the third-party processor’s microdeposits with prenotes (zero-dollar transactions) for validating accounts.

“We created two standardized payment templates within our treasury management system,” Ellis explains. “One is for a prenote transaction to send to the bank. The other is for a credit drawdown to pull a customer’s premium payment.” Both integrate payments within the standard ACH batch files used by CUNA Mutual’s other business units before sending the payments to the bank for processing.

Next, the team worked with the company’s web development group to build APIs that automatically populate the new payment templates with information that customers enter into the online pet insurance subscription form. “This API connectivity is something our treasury workstation hadn’t done before,” Ellis says. “Now policies arrive in our treasury workstation in real time—we saw this happen when we were testing. Customers sign up for a policy, enter their account information, and hit ‘submit.’ The prenote arrives instantly in our treasury workstation, where it is slotted into the appropriate batch file, ready to be sent out that afternoon.”

Moving the data internally via API significantly reduces the time required to process premium payments. Moreover, the new process has reduced costs by 97 percent compared with the pet insurance business’s original approach, by moving off the third-party financial technology platform and integrating into CUNA Mutual’s standard rails of bank communications. Most important, the prenotes offer a much better customer experience than the legacy microdeposits.

“We’ve seen a huge reduction in unverified accounts—we’ve reduced the number of customers who do not complete their first premium payment from around 30 percent to essentially zero,” Sonnenburg says. “Because customers’ ACH payment enrollment information is synced, in real time, for seamless processing all the way to the bank, we can keep more customers and retain more revenue.

“What makes this project really unique,” he adds, “is that the integration between our treasury system and our website, using web services calls, required little actual development work. The payment templates and API connectivity mean the website team can provide the information needed to charge customers, without actually understanding the inner workings of the treasury system. And the entire project, from start to finish, took a matter of weeks.”

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CUNA Mutual is now looking to extend these capabilities to groups outside the pet insurance business. “What we built is going to reduce the effort for other product lines to reuse this API functionality,” Sonnenburg says. “Upgrading all our products onto this type of capability would make it easier to maintain our treasury system end to end.”

The company seems to be headed down that path. “Internal feedback on information flows in our system suggests people throughout the company find this kind of connectivity intriguing,” Ellis says. “The idea of building API connections among different finance systems has gained a lot of traction since we completed this project. Conversations are now flowing, and APIs are being added to our IT roadmap.”

In fact, Sonnenburg sees the pet insurance payments initiative as a demonstration of the importance of having a strong treasury function. “I’m not part of the treasury department,” he says, “but I can see that CUNA Mutual has a huge competitive advantage because our treasury department is interested in consuming new ideas, making them actionable, and then delivering great results like this. The effect on the company of having an innovative treasury department may not be measurable, but it is certainly impactful.”