The human side of cross-border aid: what happens when payments fail?

Foreign aid depends on money movement, but what happens when banks, regulation and risk stop funds from flowing?

When an aid worker’s salary doesn’t arrive in South Sudan, she borrows food from neighbors. When a small clinic in northern Syria can’t pay its supplier, medicine shelves remain empty. Behind every failed cross-border aid payment is a human story.

For international NGOs, moving money across borders has always been a day-to-day activity. But in recent years, the process has become slower, costlier and more unpredictable.

The consequences of failed payments stretch far beyond the finance department, though. We investigate what happens when money meant to save lives can’t move, plus consider some of the solutions.

Scale of the problem

Cross-border aid failure is a $210 billion a year problem. That’s the total amount of foreign aid – or official development assistance, ODA for short – from OECD countries in 2024, according to an OECD press release.

Amid rapidly shifting geopolitics, major donors such as the United States, European Union and United Kingdom have announced significant cuts to their foreign aid commitments. Hence, it’s never been more important to ensure that aid arrives quickly, securely and transparently.

“Pressures on development finance and developing countries’ growth are increasing,” said Mathias Cormann, Secretary-General, OECD on the publication of aid figures. “Optimizing the effectiveness of available official development assistance will help developing countries manage these fiscal pressures, make essential investments in growth, and protect the most vulnerable.”

The consequences of foreign aid failure

When aid fails to arrive, the impact can be potentially devastating. This includes communities left waiting, if there are delays in food supply or emergency response. This leads to increased suffering and preventable deaths from malnutrition and other diseases in the worst-case scenario.

If services such as healthcare and education are interrupted or even shut down, this could undo years of progress. Plus, put millions at risk, contribute to societal instability and population displacement.

If local staff go unpaid, workers are unable to support their families or continue the vital work of aid organizations locally.

Why NGO payments fail

NGO payments fail for a variety of reasons. Stringent know-your-customer (KYC) and anti-money laundering (AML) checks can lead to payment delays and declines. Different countries have different document requirements, so transactions could fail if they’re missing paperwork, need extra verification or contain errors.

NGO payments can fail 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.

Bank systems occasionally have technical glitches, resulting in payment delays or failure. This is especially hard on NGOs, whose humanitarian work typically takes place in countries where a lack of banking infrastructure and unexpected banking issues are more prevalent.

The hidden costs of payment failure

The more effective NGOs are with money transfers, the more it will translate into the work they do. For example, increasing impact through the efficiency and effectiveness of donations.  In practical terms, this means making aid go further and work harder.

That’s increasing value for fees as well as incurring fewer losses through delays, theft and shrinkage. There’s also the substantial cost saving in staff time of not having to deal with frozen funds, blocked donations, missing transfers and ‘black box’ payments.

We’ve calculated the savings could be between €13,500 and €50,000 each year, depending on staff seniority and how much time they spend on behind-the-scenes payment admin daily.

Coping strategies NGOs use

Alternative ways for moving money across national border do exist. They include hawala, cash couriers and money service businesses, such as Western Union and MoneyGram. But the workarounds don’t always work.

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 tine-consuming, resource intensive and not an NGO’s core business.

At a time when the gap between humanitarian needs and available resources globally continues to widen. And when making more efficient and effective use of aid and increasing the amount of aid available has become critical for NGOs, it pays to consider these alternatives.

Towards long-term payment solutions

Newer payment providers, like Inpay, have effectively built giant on-us bank networks, where payments take place between participant members. Inpay controls the routing of individual payments, which has two main advantages.

We can pick the optimal route and pre-empt problems, resulting in industry-leading transaction success rates. And can ensure that there aren’t unknown FX factors, or surprise intermediary bank fees, resulting in cost savings for NGOs.

With Inpay, cross-border payments are as simple as a domestic bank transfer. We pay out to over 100 countries where recipients receive the full payment without deductions. Funds never leave the network – they’re simply re-routed to another account internally and sometimes pre-funded. This drives maximum visibility and transaction success.

Choosing the right payments provider has become essential for NGOs to achieve their mission, maintain financial stability and build sustainable operations.