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We all enjoy tracking our packages online. We confirm the order, get the tracking number, and immediately go onto the relevant website and begin watching our package move from the store to the depot, to the plane, to another depot, and finally to our doorstep.
Each ticked box brings a sense of satisfaction – like marking things off a to-do list – and it becomes all part of the purchasing experience.
However, when it comes to tracking our most valuable asset – money itself – this capability often disappears, leaving us in the dark for several days and hoping that the money either arrives in our account, or the account we sent it to.
Modern fintech solutions are addressing this issue through transparent payment platforms, making it much easier to track payments online, whether they’re domestic, international, moving between two accounts in the same bank or through several different banking systems. The benefits of this new way of doing things are only beginning to be leveraged by businesses.
The benefits of transparent cross-border payments to businesses
1. Improved cash management
Knowing where your money is, where it’s going to be, and what impacts foreign exchange (FX) transactions will have is crucial for treasury departments managing the cash flow within the business. As with all improvements to a cash management process, this allows you to reduce risk in not servicing debts, paying out suppliers and payroll, and leveraging spare cash for investments.
Payment platforms that give businesses that level of transparency are readily available, giving you a single portal to manage, view and reconcile all accounts payables and receivables.
2. Happy suppliers (and reduced support questions)
Just like we like tracking our personal packages, our suppliers benefit greatly from tracking payments they expect to receive, allowing them to manage their own cash flow better. It will also reduce the number of support queries you’ll receive as a business while the money is travelling through the chain.
Delivering this kind of positive payments experience will help nurture long-term, trust-based relationships with suppliers.
3. Reduce friction points in the supply chain
We’ve come to think of money as numbers in our account rather than notes in our hand, but every transfer of money from one country to another involves concrete steps to make it happen. Systems we never see communicate with each other and figure out how to move that digital cash from one place to another and, if that communication breaks down, friction points occur.
Real-time payments are playing an increasingly important role in the global payments ecosystem, with the number of such transactions soaring by 41% in 2020 alone.
McKinsey, 2021 Global Payments Report
Transparent payment platforms allow both sides to identify, and solve, any reasons why payments are being held up quickly and easily. It means both can work together, rather than at loggerheads, to resolve the delay and get the payment moving again.
“We’ve now been able to link modern payment systems with traditional banking infrastructure to make communication possible and identify problems quicker than ever before” said Andrew O’Garro, SVP Strategic Innovation at Axletree Solutions, whose solutions allow their clients to communicate with their financial business partners in a secure and reliable manner. “This has been made possible through technological advances and API integrations that have allowed for those legacy systems to be integrated into the contemporary payments infrastructure. By providing seamlessly integration between legacy infrastructures and modern payment platforms, we are significantly improving the end client experience by allowing for a rapid go to market and to realize the return on their investment.”
4. Reduce FX risk and fees
Sending payments through the traditional correspondent banking network can throw up some unforeseen issues, particularly when it comes to FX fees and general banking fees. Every contact point the money goes through leaves it liable for these fees. Indeed, it’s unusual for a handler not taking a cut for moving the money along.
“Businesses have come to expect that, whenever any new entity handles their money, they’ll be charged a fee for it – even if they never directly asked that entity to do it” says David Hughes, Chief Commercial Officer at TransferMate. “With traditional banking rails, you can send your money through multiple touchpoints without ever realizing it. This can mean hidden fees, charges and FX commissions that impacts what the receiver gets deposited into their bank account. Transparent payment platforms give businesses back control and eliminates these risks.”
With transparent payment platforms, when a cross-border payment is confirmed the FX rates are locked-in and the number of banking systems it goes through is greatly reduced (if not eliminated entirely) meaning that the amount paid will be the amount received. By circumventing these traditional banking payment rails, the payer will never have to send a follow-up payment to make up a shortfall that was a result of unforeseen fees or unfavorable exchange rates.
5. A trust-based payments system for multiple partners
Transparency is important when it comes to payments between one business and another, but even more important when it comes to creating an ecosystem for multiple partners. In global enterprises, where separate businesses and sub-brands all emerge into a single system, being able to move money easily, accurately, and transparently within that system is vital for basic day-to-day operations.
Business-to-Business (B2B) cross-border payments are expected to total US$150t in 2022.
How new entrants are redefining cross-border payments, EY, 2021
If different finance departments are constantly communicating back-and-forth about inaccurate or delayed payments, it’s not only the bottom-line that’s impacted, but also the relationships and trust between those departments and, ultimately, at all levels of the businesses. Getting rid of these friction points means smoother operations, bottom-line savings, and better cash management.
We’re all (demanding) consumers now
One of the issues with the digital age is that it puts small retailers up against giants. When we buy an item off that small retailer, we expect the same buying experience as we do from Amazon, with their interconnected fulfillment centers and fleet of delivery trucks operating with maximum efficiency.
Now, with online banking, instant transfers between personal accounts, and all the other digital toys we’ve been given to manage our personal money, we have (rightly) come to expect the same from our business transactions.
The transparency embedded within these new processes is the glue that holds them all together. When we know what’s happening with our money, trust builds and questions don’t get asked, saving time and money for all stakeholders.
When sending money across borders, via multiple stakeholders, is as easy as tracking your Amazon package, all sorts of new and exciting business possibilities can be delivered.
To learn more about how TransferMate can deliver transparent payments, both domestic and international, for your business, contact us today.
