5 fixes to broken cross-border payments for NGOs 

We consider the ways to improve international funds transfers for non-governmental organizations.

The former CEO of SWIFT, Gottfried Leibbrandt, summarized it well in the introduction to his 2021 book The Pay Off: How Changing the Way We Pay Changes Everything:

“The payments universe is global, but its conventions are fiercely local. The act of paying is immediate, but the receipt of payment is often frustratingly slow; it is a bilateral operation shaped by multilateral conventions.”

This highlights some of the natural tensions at the very heart of payments, plus points to possible fixes to the following five problems NGOs face:

1. Coverage
2. Speed
3. Expertise
4. Risk management
5. Trade-offs

1. Domestic vs. international coverage problem

Most payment systems are domestic in scope and operate in a single currency. Yet NGOs need to make and receive payments across national borders.

Whether it’s delivering humanitarian aid to support the casualties of conflict and victims of natural disasters, famine and poverty in low-income countries. Or paying salaries in-country, NGOs have many reasons to make international transfers.

Banks have linked their different domestic systems together to create an international correspondent banking network. This helps achieve global coverage in theory. But in practice, payments can be time-consuming to process, expensive and slow. And that’s a problem when failed NGO payments have real impact on people’s lives.

Solution: Alternatives to SWIFT wire transfers for cross-border payments exist to make global payment as quick and simple as local bank transfers.

For example, Inpay has developed its own proprietary network of global financial institutions across 200+ countries. That’s in addition to the technical and regulatory rails behind the scenes to make cross-border payments happen.

2. Immediate vs. delayed speed problem

Consumers can send e-mails around the world instantly. Or order a meal or cab to the door in minutes. Yet cross-border payments may take up to five days, or longer if the payment gets lost or stuck. All businesses making B2B cross-border payments face this problem, not merely NGOs.

What’s more, so much of the process seems to be a ‘black box’. And either hidden or out of the sender’s or receiver’s control. That’s because most payment innovation has been B2C, domestic and on the front-end. When it comes to B2B, cross-border payments or back-end infrastructure, less so.

As a results, transparency and traceability can be a challenge. Daily cut-off times, unexpected delays, nasty fee surprises, failed payments and exceptions are commonplace.

Solution: Some payment service providers can receive funds in any currency and pay out locally in real-time 24x7x365. For example, the Inpay SEPA instant solution is real-time all the time in the 36 SEPA countries. Real-time payment is also available in the UK with GBP and further afield with local payment offerings.

As a modern, real-time system, it confirms or rejects 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.

3. Simple vs complex expertise problem

On the surface, payment is the simple exchange of value between two parties. Yet behind the scenes, it’s more complicated. That’s particularly when the parties are not face to face and the exchange is cross-border.

Part of the problem is technical. Cross-border payments rely on a system of systems. Each of which comprises individual components that can vary significantly, which adds to the complexity.

Then there’s regulation. Sanctions regimes, know-your-customer (KYC) and anti-money laundering (AML) checks differ country to country and change frequently, too. All in all, it’s hard for NGOs to know how to prevent or solve payment problems.

Solution: Specialization is key. The right payment service provider has NGO sector expertise to know what’s needed to deliver successful payments.

Inpay has experience around the documentation required and the quickest way to route payments for particular transfer corridors to pre-empt problems. This is a different approach and skillset to a bank, who wouldn’t necessarily support and guide customers to this extent.

4. Risk vs. reward risk management problem

 From a bank point of view, the higher the perceived risk of a client, the more due diligence required. This cuts into bank profit margins, causing them to opt out of, or terminate, relationships in certain geographies or sectors altogether.

This practice, known as ‘de-risking’, has long concerned governments and organizations, such as the World Bank. It threatens financial inclusion. It disproportionately affects smaller countries with limited financial markets. And it negatively impacts NGOs.

NGOs face difficulties in obtaining financial accounts as well as high costs in maintaining them. They may experience delays and even denials of fund transfers. And fear losing access to the financial system altogether if their organization or their transfer corridors are suddenly de-risked.

Solution: Wholesale ‘de-risking’ of NGOs, without considering their level of risk or individual risk mitigation measures, is not in line with FATF Recommendations, which advocates a risk-based approach.

Inpay was founded following a humanitarian crisis in 2008, so our origin story is bound up with the NGO sector. We have a risk appetite to service NGOs because robust compliance policies and procedures are embedded as part of our DNA. And are prerequisites of our license as a regulated entity under the remit of the Danish Financial Supervisory Authority.

5. Speed vs. cost trade-off problem

Cross-border payments can be expensive. Moreover, fees may not be consistent or known up front. It depends how many banks are involved in the chain, and which ones. But also, on who pays the transfer fee: the sender, the recipient or both parties.

Currency is another factor influencing speed and cost. 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.

NGOs may face a trade-off between transaction speed and cost, so may opt for slower transaction times to save money. This is clearly sub-optimal, given their emergency, humanitarian work in hard-to-reach countries.

Solution: Some payment providers, such as 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.

Inpay also supports scores of local currencies, in addition to simplifying the logistics of multi-currency operations. This means NGOs don’t have to contend with complex, ever-changing pricing and FX models. We also pre-fund transactions in bulk, which helps ensure more right-first-time payments.