Do NGOs need to consider the alternatives for cross-border money movement?

NGOs face growing pressure to rethink how they send funds abroad. Are traditional channels still fit for purpose?

What decision-makers at the largest NGOs told us didn’t make for easy listening. Inpay commissioned independent research into the sector to understand the biggest payment pain points. During 36 hours of interviews, NGOs complained that cross-border payments were often slow and unreliable:

“It takes a week – sometimes four weeks. Sometimes it seems that the money has got lost and then it takes us weeks and months to find it.”

Payments were delayed, blocked or lost:

“We use correspondent banks, which is often where the problem is because you have three banks and the payment is lost somewhere between them.”

Plus, NGOs didn’t necessarily know how much would arrive on account:

“They haven’t received the amount that we promised. We much prefer to pay them in local currencies, but when we send dollars, they get hit with fees.”

This is all while NGOs are caught between increasing costs, reduced funding and higher demands on their service. Something has got to give for NGOs to make more efficient and effective use of their resources. This is pushing them to consider alternative ways to move money internationally.

Listing the alternatives

There are at least half a dozen ways to make cross-border payments. While each method has its advantages, each also has its drawbacks, primarily around coverage, cost and reputational risk.

1. Correspondent banking

Correspondent banking has an established reputation. It’s known and trusted by donors, NGO boards and governments as a secure way to move money. But while coverage is global in theory, in practice some payment corridors are beyond the reach and risk appetite of participating banks. Execution times, transfer routes and fees are not always known upfront.

2. Card schemes

Major international card schemes are promoting their networks for remittance as well as purchase transactions. It’s a secure way to move money and generally faster than bank transfers. But coverage may be patchy, execution times vary and costs not viable for high-value payments at scale.

3. Exchange houses

Exchange houses are popular in the Middle East with a well-developed network of kiosks and presence in malls. But the proposition tends to be consumer-facing, particularly around unbanked expat workers wanting to send money home. It’s difficult to initiate transfers outside the Middle East or send to countries beyond popular expat transfer corridors, so may not be a practical alternative for cross-border NGO payments.

4. Hawala

Hawala is an informal funds transfer system, which is good for unbanked customers, and generally quicker and cheaper than bank transfers. But its anti-financial crime reputation and global coverage is poor, which may mean it’s not an approved method for all NGOs.

5. Service businesses (MSBs)

MSBs range from large multi-national brands, such as Western Union and MoneyGram, to unregulated and unregistered businesses that operate without a license. The bigger operators are known, trusted, quick, convenient and secure. But transaction limits may apply, commissions are expensive and coverage patchy due to ‘de-risking’.

6. Cash couriers

Cash couriers are useful in crisis response situations, unstable or remote areas. Access to funds is immediate if there’s no reliable banking system or accounts are frozen, blocked or heavily restricted. But there are clear security risks (theft, loss, kidnapping or violence against couriers), reputational risks and no audit trial for physical cash.

Evaluating the alternatives

Alternative ways for moving money across national borders do exist. But they are often partial or point-to-point solutions, meaning NGOs may have to source methods by country. Or maintain ‘back-up’ relationships with multiple suppliers, which is time-consuming and resource intensive.

It’s also difficult to escape the drawbacks of correspondent banking. Even payments that don’t involve a bank account at the customer level (e.g. remittances via MSBs) rely on correspondent banking for the actual transfer of funds.

Sending an international bank transfer requires a lot of information. The potential for delays is high. This applies to all organizations initiating international payments, not just NGOs. And with the equivalent of world GDP moved across the SWIFT network every three days, things may not always go smoothly.[1]

Time to rethink the way NGOs move money?

Non-bank payment providers like Inpay are emerging with the right connections to link NGO destination and origin countries.

Because they hold and process funds, they are regulated entities. A robust compliance approach and anti-financial crime controls are prerequisites of their license.

This means they are already accepted by governments. And may well conform to NGO governance requirements to use regulated providers.

Inpay is a cross-border payments provider that is faster, simpler and cheaper than your bank – and built for NGOs.

[1] 2023 SWIFT Annual Review, 13 June 2024, https://www.swift.com/news-events/publications