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10 NGO payment challenges, causes and possible cures

We examine the ten biggest payment pain points for NGOs and suggest possible cures.

Diagnosing payment problems and understanding the causes can help NGOs seek the right treatment and potential cures.

1. Coverage

Challenge: Cross-border payments are harder to organize than domestic ones.

Cause: To achieve global coverage, banks rely on a network of correspondent banking relationships, which link their different domestic systems together. Great in theory, but difficult to implement in practice across different countries, currencies, time zones and IT protocols.

Cure: Alternatives to SWIFT wire transfers for cross-border payments exist to make global payment as quick and simple as local bank transfers. Some payment service providers have developed their own global pay-in/pay-out networks. That’s in addition to the technical and regulatory rails behind the scenes to make global payments happen.

2. Transparency

Challenge: Payments get stuck or go missing altogether.

Cause: Account-to-account cross-border payments are often processed by SWIFT. While this is a great method for sending money around the world, it offers very little transparency as to the route and status of the payment. With the equivalent of world GDP moved across the SWIFT network every three days, things may not always go smoothly.

Cure: Consolidating relationships into the right payment partner gives access to a global network. And pre-funding transactions in bulk helps ensure more right-first-time payments.

3. Traceability

Challenge: Payments can’t be tracked easily.

Cause: Based originally on telex, SWIFT has long been a single message system with no response. This is why there’s historically been limited trackability.

Cure: By contrast, modern real-time payment systems are designed to confirm or reject each transaction individually to both sender and recipient. Payments are irrevocable, so both parties know whether payments have been successful within seconds, which leads to better traceability and fewer exceptions.

4. Speed

Challenge: Payments take too long.

Cause: Cross-border payments can take days, weeks or even months, due to legacy technology platforms and a lack of standardization, among other reasons.

Cure: Some payment service providers can receive funds in any currency and pay out locally in real-time 24x7x365. That’s in countries with an instant payment infrastructure, or offer near-instant settlement elsewhere.

5. Price

Challenge: NGOs don’t necessarily know the price of sending a payment in advance.

Cause: The more banks involved in a SWIFT chain, the more expensive the transfer is likely to be. But it’s not always possible to know up front exactly how many banks are involved, or which ones. Deductions also depend on who pays the transfer fee: the sender, the recipient or both parties.

Cure: Some payment providers, like Inpay, can offer consistent fees, known up-front with no deductions. That’s irrespective of the transaction amount, originating country or currency, whether it’s a one-off, bulk or recurring payment.

6. Cost

Challenge: Payments cost too much.

Cause: For high volume currency pairs, such as US dollar to British pound, fewer intermediary banks are involved. Hence shorter chains, quicker processing times and lower costs. However, for less common currency pairs, the opposite is true.

Cure: Complex, ever-changing pricing and FX models are a no-no. International transfers can be as cost-effective as domestic ones. Some payment service providers can support scores of local currencies. That’s in addition to simplifying the logistics of multi-currency operations.

7. Support

Challenge: NGOs don’t know where to turn for advice.

Cause: Domestic banks don’t provide the true consultative service that NGOs desperately need – because they’re not necessarily set up to do so. They’re not experts on other countries’ banking infrastructure. Or on specific payment corridors and what’s needed to move transactions along.

Cure: Specialization is key. The right payment service provider has NGO sector expertise and experience. They can offer guidance on the documentation required, the questions likely to be asked, the quickest and most cost-effective way to route payments to pre-empt problems.

8. Compliance

Challenge: Complex, dynamic regulations can be difficult to navigate.

Cause: Regulatory requirements, including sanctions regimes, know you customer/anti-money laundering checks (KYC/AML) and the need for documentation, differ country to country and change frequently.

Cure: NGOs need financial partners who understand their sector and will guide them through the maze of regulatory requirements as quickly and cost-effectively as possible. And if this is backed by an industry-leading compliance framework and advanced screening capabilities, so much the better.

9. Reconciliation

Challenge: Back-office reconciliation can be complex and resource-intensive.

Cause: With so many payment corridors, currency pairings and transfer timeframes, international payments can quickly become complex – and reconciliation even more so. NGOs want operational efficiencies, particularly around repetitive admin tasks which are not their core business.

Cure: Consolidating funds into a single, easy-to-reconcile format simplifies admin on the back end. Payment providers should also be able to provide a simple user interface to view all payments in one place, which helps with reconciliation but also improves decisioning and speeds up issue resolution.

10. Scalability

Challenge: Adding new payment corridors and growing payment volumes through existing ones can be tough.

Cause: Scaling operations cross-border is hard because every country is different. There are cultural and compliance differences, plus language, logistics and localization challenges. Not all banks have the appetite to service hard-to-reach countries.

Cure: A unified payments platform packaged in a single API will help NGOs expand their important work. When the pay-in/pay-out solution comes from one place, NGOs can manage payments end-to-end on a single contract. And avoid the multi-supplier headaches of different providers for different payment corridors or regions.

How Inpay can help

While they are generally the default entry point into financial services, banks may be unwilling or unable to deal with everyday NGO challenges. Fortunately, other options are available.

Modern cross-border payment solutions providers, like Inpay, are making the flow of global payments faster, easier and more cost-effective. They have the right reach to link NGO destination and origin countries and may already be accepted by governments as regulated entities.

When it comes payment speed, trackability, cost-effectiveness and service, alternative providers can certainly rival traditional ones. This means real-time pay-outs, absolute traceability, cost advantages and domain expertise.

Covering 70% of the top 17 countries receiving humanitarian aid via local bank transfer, and the remainder via international wire, Inpay helps the financial inclusion of societies otherwise cut off from the global economy.

Contact us at [email protected] to find out how we could help support your important work.

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