Corporate, E-commerce, Financial Services, Insurance, Payroll, Tech

Achieving payments happiness, the new standard in global payments

The global payment process remains ineffective and outdated. Using traditional payment rails, funds can take several days or more to reach beneficiaries. In fact, given the number of parties required to facilitate cross-border payments, it can be faster to hop on a plane and hand over the cash than it is to send it over a payment network.

But lengthy payment cycles are not the only problem plaguing businesses as they send funds across country boundaries. A lack of transparency makes it difficult, if not impossible at times, to know where a payment is as it bounces around correspondent banks.

Even worse, when the beneficiary does receive payment, hidden costly intermediary charges reduce recipient amounts. Since these often come as a surprise to both parties, it is all too easy to damage business relationships by putting undue pressure on vendors with tight margins.

The result is a state of dissatisfaction as businesses struggle to efficiently and cost effectively send international payments.

So, what does payments happiness look like? In a recent survey conducted by consulting firm, Strategic Treasurer, 43% of businesses indicated a need for faster payments capabilities.[i] Over half of these respondents highlight real-time payments as a priority.[ii]

While it’s true, that recent innovations in domestic payments have resulted in near instant payment networks for most of Europe, many of the solutions available today still fail to address the other challenges that businesses face. For one thing, manual payment processes continue to encourage the slow and inefficient nature of global payments.

For 60% of businesses responding to the Strategic Treasurer survey, that also means a high propensity for errors that reduces process efficiency.[iii] Likewise, nearly half of respondents indicated a need for timely visibility into all transactions occurring globally.[iv]

Payments happiness, however, isn’t hard to find. New and emerging technology innovations are making it simpler and faster to send global payments, while increasing efficiency and transparency for all concerned.

Using technology to achieve payments happiness

Emerging technologies are improving international money movement for businesses by introducing previously unattainable transparency and efficiency. Blockchain, for example, uses encrypted ledgers to provide real-time verification of transactions. Since data is held in the cloud, all parties to the payments process have complete visibility.

By converting funds to the cryptocurrency used by many blockchain ledgers, it is also possible to avoid intermediary fees. Funds are simply converted into local currency before being transferred to the recipient, providing a faster and more cost-efficient way of sending payments.

Cloud-based APIs are also changing the way that businesses send and receive payments. APIs act as a connection layer, enabling businesses to unite with a domestic partner network.  

In simple terms, a domestic partner network is an interconnected web of domestic clearing systems composed of local tier-one banks and partners. Using APIs, businesses connect with a payment provider to seamlessly initiate payments.

This makes it possible to simultaneously initiate multiple payments and then track the process from approval through settlement. Complete visibility from start to finish puts the business in control of the process, making it simpler for AP departments to manage payments functions and keep vendors in the know.

When it comes to moving funds internationally the SWIFT network has historically been the default option allowing a broad reach. Recent developments, namely GPI, have brought an increased level of transparency and speed.

Avoiding use of the SWIFT network by routing payments domestically eliminates correspondent and intermediary banking fees, supporting faster payments, often in real-time, at lower cost. As a result, beneficiaries always receive the full payment amount, promptly and with fewer delays. In this case, happier payments also means happier business relationships.

Another pain point of the cross-border payments process is the manual overload associated with functions from initiation through settlement. Over half of treasury departments responding to a Deutsche Bank survey indicate that manual payment generation workflows are error prone and time consuming.[v]

Use of a domestic partner network improves the speed and agility of back-office functions, by automating the process end-to-end. Automation reduces instances of manual intervention as well as repetitive data entry, supporting a more efficient process with far fewer errors.  

By eliminating manual processes associated with functions such as verification and settlement in favor of straight through processing, corporations can reduce errors, realize a faster payments lifecycle and even automatically reconcile payments without the need for human involvement.

Paired with access to a domestic clearing network, the intermediary fees associated with correspondent banks are also avoided. The result is stronger business relationships, the definition of payments happiness.

[i] “2019 B2B Payments Survey Report.” Strategic Treasurer, 2020. Web.

[ii] “2019 B2B Payments Survey Report.” Strategic Treasurer, 2020. Web.

[iii] “2019 B2B Payments Survey Report.” Strategic Treasurer, 2020. Web.

[iv] “2019 B2B Payments Survey Report.” Strategic Treasurer, 2020. Web.

[v] “The Future of Payments: Series 2/Part I. Post Covid-19: What Executives Are Thinking and Doing.” Deutsche Bank Research, Jan. 13, 2021. Web.

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