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10 reasons why NGO payments are delayed 

The underlying reasons for delayed payments and some suggested fixes.

Cross-border payments may take anything between three and five days to arrive. Longer if payments get lost or stuck. That’s partly because behind the scenes, international transfers are like a huge game of pass-the-parcel.

Banks in different countries pass messages to each other, sometimes in long chains. These chains stretch across borders, time zones, currencies. But with the equivalent of world GDP moved across the SWIFT network every three days, things don’t always go smoothly. We look at some of the factors that can cause delays.

1. Natural disasters and global events

War, pandemics, tsunamis, earthquakes and so on may result in changes to local bank systems availability, staffing and working patterns. This could lead to delays in international bank transfers.

This is especially hard on NGOs, whose humanitarian work support the casualties of conflict and victims of natural disaster, famine and poverty.

What’s the fix?

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, like Inpay, 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 cross-border payments happen.

2. Lack of intermediary relationships

To achieve global coverage, SWIFT relies on a network of correspondent banking relationships, which connect different domestic systems together.

NGO payments can be delayed if no intermediary banks are willing to transmit payment messages between sending and receiving banks. This is especially the case for hard-to-reach countries and those ‘de-risked’ by the global clearing banks and their downstream correspondent banks.

What’s the fix?

Some payment providers, like Inpay, have effectively built a giant on-us bank network, where payments take place between participant members. Funds never leave the network, they’re simply re-routed to another account internally. Sometimes transactions are pre-funded, which helps to side-step the problem of hard-to-reach and ‘de-risked’ countries.

3. Compliance checks

Stringent know-your-customer (KYC) procedures and anti-financial crime checks can lead to payment delays. This is particularly around anti-money laundering (AML) and anti-terrorism checks. Or if the payment information raises suspicions or requires additional verification.

Banks cannot take a risk-based approach to sanctions; it is an absolute. However, as sanctions may be imposed at an international, regional or national level, and updated frequently, sanctions screening is no simple matter. This adds to the time to process NGO payments.

What’s the fix?

Modern risk management pairs minds with machines. Holistic, integrated risk management systems, linking procedures to controls and risk assessments, training staff and investing in AI-driven compliance capabilities. These are just some of the ways regulated payment partners make compliance checks thorough without being cumbersome or time-consuming.

4. Missing paperwork

Different countries have different document requirements. This can quickly become complicated for NGOs, who must keep track of what’s required to submit a transfer request.

What’s the fix?

Specialization is key when it comes to documentation requirements and the quickest way to route payments to pre-empt problems. This is a different approach and skillset to a bank, who wouldn’t necessarily support and guide NGO customers to this extent.

5. Incorrect payment details

Even minor errors or omissions in payment instructions, such as an incorrect account number or beneficiary name, can cause international payments to get stuck. The sending bank may have to investigate, which takes time and causes delays.

What’s the fix?

Various fixes can save time up-front, including smart logic that pre-empts possible mistakes, saved payees to prevent manual key-entry errors, and support from human experts.

6. Weekends, bank holidays, bank cut-off times

Most banks process payments on business days only. So, if a payment crosses a weekend, bank or public holiday for any banks in the correspondent banking chain, expect delays.

The same is true if an international transfer is initiated at the end of a workday and misses the bank cut-off time. It may not be sent until the morning of the next business day, adding extra time to the transfer. Delayed or failed NGO payments are not merely frustrating, they have a real impact on peoples’ lives.

What’s the fix?

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

7. Time zone differences

When it’s noon in New York, it’s 4.00am, some 16 hours ahead, in Canberra, Australia. So, if transfers cross time zones, payment may be delayed. Combine this with the above point about differing work weeks in different countries, NGOs may need to factor in extra time on the receiving end of transfers.

What’s the fix?

Payment providers running their own proprietary networks can better control the routes that transfers take. This helps side-step some problems associated with international time differences.

8. Technical outages

Electronic systems occasionally have technical glitches. Payments may be held until the issue is resolved, which could cause delays.

What’s the fix?

Technical outages can never be wholly prevented. Yet the way modern payment systems are built helps mitigate the negative impact of uncertainty.

Unlike old-fashioned batch systems, real-time payment systems confirm or reject each transaction individually. Payments are irrevocable, so both parties know whether payments have been successful within seconds, which leads to better traceability and fewer exceptions.

9. Currency differences

If payments are sent in one currency and received in another, it may add to the processing time. Potential delays could increase for so-called ‘exotic’ or less common currency pairs. Also, the more banks involved in a SWIFT chain, the slower – and more expensive – the transfer tends to be.

What’s the fix?

International transfers can be as quick and cost-effective as domestic ones. Some payment service providers support scores of local currencies. That’s in addition to simplifying the logistics of multi-currency operations. They can also offer consistent fees, known up front with no deductions. That’s irrespective of the transaction amount, originating country or currency.

10. Fraud prevention

If unusual, suspicious or inconsistent activity is detected, banks typically ask for more information to protect both sender and recipient from potential fraud. This adds to transaction processing times.

What’s the fix?

Modern, real-time payment systems generally have enhanced fraud detection and prevention capabilities built in to counter potential fraud.

How Inpay can help

Inpay’s proprietary network of global financial institutions makes it quicker, safer and more cost-effective for NGOs to send money internationally compared to SWIFT wire transfers, money service businesses and cash couriers.

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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