SUMMARY
The widespread adoption of payment innovations in the consumer space is driving transformation in the cross-border payments process.
Over the last decade, digital innovations have transformed the overall payments space. Cross-border payments, however, continue to be a cause of friction for many of our clients.
Chief financial officers (CFOs) and treasurers experience seamless payment integration in their everyday lives, from on-demand taxi services and personal investing to contactless purchases.
When they arrive at their office to execute cross-border payments, though, they could be forgiven for feeling as if they had gone back in time.
Companies utilizing outdated methods for their cross-border payments process cite this as one of their more manual, opaque and time-consuming tasks. However, we may be on the brink of major change.
Corporate cross-border payments look poised to embrace the payment innovations that have revolutionized so many aspects of our everyday lives.
New solutions based on APIs – application programming interfaces – are helping to address the pain points in this often-challenging process. Cross-border payments can now be automated with much more ease, producing greater efficiency and transparency than ever before.
APIs can connect one system to another and enable interaction across the digital ecosystem without requiring a highly technical implementation.
The resulting ease of connectivity enables new levels of access between platforms. And this is changing the way organizations interact with their banking providers.
From manual to automated
Despite the innovations driving change within treasury management, manual cross-border payments processing remains prevalent.
Working in spreadsheets, uploading payment files onto banking platforms or even calling client service officers at the bank to execute payments on their behalf are all-too-common realities for many companies.
Such practices are not only incredibly time-consuming, but also vulnerable to human error and fraud.
Executing straight-through payments from a company’s accounting software and its banking provider is not entirely new, of course.
Historically, though, it demanded significant time and resources as well as a complex technology implementation.
Owing to the development of API-based solutions, companies can now communicate payment files directly to their bank with little to no technology adoption or customized file formatting.
The files are sent in real time, with a payment confirmation file sent to the company within minutes.
Using this technology allows a company to achieve straight-through processing without undergoing a large overhaul of its current processes or an expensive and tedious technology implementation.
Transparency in the process flow
Traditional cross-border payment flows lack transparency at every stage of the end-to-end process. Treasury staff thus often lack insight into the following questions:
- Is the payment information correct?
- What foreign exchange rate will be applied to this payment?
- What is the status of the payment?
- Is the payment held up by sanctions?
- How many intermediary banks will charge a fee for processing the payment?
- Has the intended beneficiary received the payment amount in full?
Increasingly, however, companies now call up information covering account information accuracy, total transaction cost and payment status.
Utilizing SWIFT gpi,1 banks can confirm that the beneficiary account information matches that of the ultimate receiving bank.
According to SWIFT, initiating banks are also able to verify key details before their transactions are sent, including whether the data in their payment instructions is correct or if it matches the requirements of the destination country.2
By confirming account information prior to initiating the payment, payees and beneficiaries can avoid errors and the need for a time-consuming follow-up investigation.
Another pain-point in the cross-border payments process is the lack of insight into the exchange rate applied to the payment.
Through API connectivity, treasury organizations can receive real-time exchange rates directly into their enterprise resource planning system.
This visibility provides insight into the cost of the transaction at the beginning of the payment process, as opposed to reconciling the total payment cost after the transaction is completed.
An additional friction point includes the lack of transparency on the status of a payment once the foreign exchange payment is released.
Cross-border payments face sanction screenings, sometimes at multiple points throughout the process, which can result in delays.
APIs allow end-to-end tracking of the payment, providing insight into its status and information as to what might be causing a delay, for both the payor and the beneficiary to view.
Once a payment is received, APIs can provide the confirmation of receipt to both parties.
Revolutionizing the process
APIs are changing the treasury landscape. The ability to call up real-time data on everything from account details and exchange rates to payment status is transforming the way cross-border payments are executed. Automation is quickly replacing manual tasks, removing friction and freeing up resources for more value-added tasks. The risk of fraud or human error is thus dramatically reduced, and increased visibility can help provide predictability of cash flow for beneficiaries.
Please contact your Private Banker or Treasury Management Specialist to discuss how your organization can use APIs to improve cross-border payment processes.
