The safety of banks for NGO payments: the 4 biggest myths

NGOs rely on banks, but should they? We bust 4 major myths about how safe banks really are for cross-border NGO payments.

Banks have been used as a safe place to keep money and valuables since around 3,000 BC. That’s when the priests of ancient Mesopotamia built warehouses to store tithes and religious offerings.

Banks still offer a safe place to store funds. And nowadays bank account deposits are protected up to a certain amount in most countries. But when it comes to payments and moving funds account to accounts, including cross-border, that’s a different matter…

We investigate whether banks are a safe bet, a safe partner, a safe pair of hands and a safe choice.

Myth #1: Banks are a secure investment, safe from risk

The business of banking involves risk. So, it naturally follows that banks are good at assessing risks – their own. But what does this mean for NGOs?

Well, while NGOs may regard banks as a safe bet, banks may not feel the same way about NGOs. In fact, depending on their nature of their work, banks may regard NGOs as outside their risk appetite.

That’s why NGOs face difficulties in obtaining financial accounts in the first instance as well as high costs in maintaining them. They may experience delays and even denials of fund transfers. And could lose access to the financial systems altogether if their bank suddenly ‘de-risks’ their organization or transfer corridors.

Not every bank is willing to support cross-border transfers to high-risk and/or difficult-to-reach countries. Choosing the right partner helps mitigate the risk of de-banking/de-risking.

How Inpay is different:

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 serve NGOs and see our robust compliance approach as a competitive advantage to understanding and mitigating NGO risk. It’s also a requirement of our license as a regulated entity under the remit of the Danish Financial Supervisory Authority (FSA).

Myth #2: Banks are worthy of trust, a safe partner

On the surface, payment is the simple exchange of value between two parties. Yet behind the scenes, it’s more complicated, particularly for remote, cross-border payments.

The nature of NGO work – delivering humanitarian aid, supporting the casualties of conflict and low-income countries – further complicates international payment flows. Factor in civil or political unrest, banking outages, differing regulations, dynamic sanctions regimes, and many banks are quickly out of their depth.

That’s not surprising. Local or regional banks specialize in offering everyday products and services, such as deposit accounts, savings products and mortgages. Enabling cross-border payments is not a focus, more a side offering.

Consequently, they’re not set up to provide the true consultative service that NGOs desperately need. For example, expertise on other countries’ banking infrastructure, specific payment corridors and what’s need to move payments along.

NGOs must consider whether banks are worthy of their trust. Is your bank a safe partner as you scale and diversify your activities? When failed payments directly impact peoples’ lives, can you rely on your bank to support your vital work?

How Inpay is different:

Specialization is key. The NGO sector is part of Inpay’s core business. We employ experts who know what’s needed to deliver successful payments. We have experience as to the documentation required and the quickest way to route payments for specific 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.

Myth #3: Banks are free from danger; you’re in safe hands

Banks may be seen as a safe pair of hands. But when it comes to innovation or even tracking delayed or stuck payments, things may be out of their hands.

They’re out of their control due to the clunkiness of legacy correspondent banking. To achieve global coverage, banks have built an international network of correspondent banking relationships, which link their different domestic systems together. Great in theory, but in practice payments can be time-consuming to process, expensive and slow.

It’s not just a legacy problem, but also one of interoperability. Individual participants cannot change things by themselves, precisely because they’re part of a global system. Everyone then moves at the pace of the slowest. Participants want a return on their investment in technology and processes, so they may be disinclined to change.

It’s possible to send an e-mail across the world in seconds. Or order a ride or meal to the door in minutes. But sending funds overseas seems stuck in a bygone era. NGOs can’t easily predict fees or track payments, making it nearly impossible to know how much will arrive on account or when. Clearly, this is sub-optimal.

How Inpay is different:

Inpay has built a proprietary network with banks and financial institutions in more than 200 countries. We control transaction routing across our giant on-us network. This explains how we’ve sped up payments from T7-3 to T0. And have industry-leading transaction success rates of 99.6%.

Myth #4: Banks are a safe choice; it’s good to be on the safe side

NGOs may feel they’re playing it safe by partnering with a bank. They’re long-established, reputable – a safe choice – as well as the default entry point into financial services for many business sectors. Moreover, internal governance stipulations may also require NGOs to use banks and traditional providers.

But the size of regulatory fines levied on banks tells a different story. Global financial regulators levied 80 fines in the first half of 2024, totalling $263 million for non-compliance with anti-money laundering (AML) regulations, including know your customer (KYC), sanctions, suspicious activity reports (SARs) and transaction monitoring violations. This is a year-on-year increase of almost one-third.

Non-bank payment providers have the right reach to link NGO destination and origin countries. They may already be accepted by governments as regulated entities. So, a robust compliance approach and anti-financial crime controls are prerequisites of their license.

What’s more, 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.

How Inpay is different:

Inpay is regulated by the Danish FSA and compliant in other jurisdictions as to how it conducts AML and counter-terrorist financing procedures. Inpay has never been subject to a regulatory investigation. We can process complex, individual, cross-border payments with full transparency and our internal security protocols meet and exceed the strict SWIFT standards.

Conclusion

While banks remain a core part of the global financial system, they’re not always the safest or most efficient option for NGO payments. They’re not the quickest, cheapest or most knowledgeable either.

By questioning outdated assumptions, NGOs can explore more effective alternatives for moving funds, especially to high-risk or underserved countries, thereby making better use of scarce resources.