Reimagining payments insurance: A revenue growth opportunity for innovative bank product leaders

Payments insurance is an emerging concept designed to protect customers from specific types of fraud, operational errors, and unauthorized transactions. With the increasing sophistication of fraud (especially authorized push payment fraud) and cyber threats, customers — both retail and commercial — are hungry for added protection. Yet most banks remain reactive, covering losses or passing on costs without creating value.

An innovative Head of Product sees this not as a liability but as a chance to turn risk into revenue. By embedding payments insurance as a premium service within an A2A payments hub, banks can offer customers peace of mind while monetizing their risk management capabilities.

The rapid expansion of real-time payment schemes such as The FedNow® Service, SEPA Instant, and TCH’s RTP has made payments faster than ever, but it has also introduced new challenges in fraud detection and risk management. The ability to track and assess transactions across multiple payment types through a full payments hub gives banks unmatched visibility, enabling dynamic risk assessment and the opportunity to offer a seamless insurance product to mitigate those risks. At the same time, evolving regulations around consumer protection and fraud liability are increasing pressure on banks to take proactive measures. Payments insurance can position a bank ahead of these regulatory shifts, ensuring compliance while generating new revenue.

In an era where traditional banking revenues from fees and interest margins are under pressure, payments insurance represents a promising avenue for diversification. Customers are increasingly willing to pay for financial security, making insurance an attractive proposition that turns risk mitigation into a competitive advantage.

ACI Connetic’s embedded payments intelligence capability equips bank product leaders with the tools to design and launch payments insurance services, underpinned by real-time analytics and AI-powered fraud detection.

Each payment is dynamically scored based on fraud signals, transaction patterns, and behavioral analytics. This enables product teams to build insurance offerings with risk-adjusted pricing, creating tiered plans or per-transaction coverage based on the likelihood of fraud. Customers with lower-risk transactions could pay reduced fees, while higher-risk transactions could command higher premiums, ensuring a balanced and profitable model.

By leveraging advanced machine learning models, ACI Connetic can stop fraudulent transactions before they occur. This combination of prevention and insurance provides a unique selling point — offering customers the assurance that their payments are both protected and insured. With fraud losses costing financial institutions billions annually, reducing fraudulent transactions translates directly to cost savings and improved financial performance.

Product teams can design tailored pricing structures that fit different customer needs. Subscription services can offer broad coverage for everyday transactions, ensuring a consistent and predictable revenue stream. On-demand insurance can allow customers to cover high-value transactions selectively, providing flexibility and a pay-as-you-go model. Corporate plans can extend protection to businesses seeking coverage against invoice fraud, vendor payment errors, or cybersecurity risks, offering banks another avenue to generate high-margin revenue.

Security and trust are paramount in financial services. Banks that offer insured payments differentiate themselves in the market, fostering deeper customer relationships. Consumers and businesses that rely on these protections are more likely to remain loyal, reducing churn and increasing lifetime customer value. ACI Connetic provides banks with the infrastructure to seamlessly integrate payments insurance, ensuring an intuitive and frictionless customer experience.

New fraud protection regulations are shifting liability for unauthorized transactions to financial institutions. By implementing an insurance model that aligns with compliance standards such as PSD2, AML directives, and CFPB guidelines, banks can not only mitigate their risk exposure but also generate revenue by offering proactive protection solutions. Compliance, rather than being a cost center, becomes an opportunity to offer value-added services.

For the ambitious Head of Product, the revenue model for payments insurance is compelling. Recurring income can be generated through subscription-based coverage, where customers pay for insured transactions monthly or annually. Transactional revenue can be driven through per-transaction insurance fees, particularly for high-value or cross-border payments. Additionally, banks can introduce premium corporate offerings, where businesses pay for tailored fraud protection plans that mitigate risks across their payment operations.

Scaling this model across larger institutions processing billions of transactions presents an even greater financial upside. Moreover, the cost savings from fraud reduction contribute to improved profitability, reinforcing payments insurance as both a defensive and offensive strategy for growth.

The banking industry is undergoing rapid transformation, and those who innovate first stand to gain the most. Payments insurance is not just a fraud mitigation tool. It is a strategic product innovation that positions banks ahead of competitors. By embedding this offering within ACI Connetic’s payments hub, banks gain the ability to differentiate their services, enhance customer value, and establish a new revenue foundation.

Banks that adopt payments insurance can prevent fraud and build their reputation as trustworthy financial partners. Customers who recognize the value of secured transactions will not only opt into these services but also be more inclined to consolidate their financial activities with a provider that prioritizes security.