Why transparency matters in cross-border payments

“Transparency has been a hot topic within the payment industry for years, but discussions have mostly centered around price, for example processing costs and interchange fees on payment cards,” explains as Sarah Louise Teschl, Head of NGO sales at Inpay.

She believes that the next level of transparency is understanding the journey of a payment. “So much of the process seems to be a ‘black box’. It’s either hidden or out of the sender’s or beneficiary’s control, particularly for international payments, which are by nature more complex.”

Why are international payments so complex?

If the payer and payee are in different countries and bank locally, their respective banks won’t necessarily use the same domestic payment system. Rather, they rely on a network of international correspondent banks.

This enables banks to offer services internationally, without having local branches. Even payment services that don’t involve a bank account at the customer level (e.g. remittances) rely on correspondent banking for the actual transfer of funds.

“Account-to-account cross-border payments are often processed by SWIFT. While this is a great method for sending money around the world, it offers very little transparency as to the route and status of the payment,” says Sarah. That’s especially if things don’t go as planned or involve countries that are under-served.

What day-to-day payment transparency – or lack of it – means

“NGOs are probably the best example of organizations that need to send large sums to countries, which may be considered difficult to reach. Having dealt with many NGOs over the years, their most common complaint is that payments get stuck,” explains Sarah.

Their questions are legitimate: When will the payment arrive? How many intermediary banks are involved, and which ones? What are the associated fees? Is the payment traveling via the smartest route? They don’t know and no-one can tell them.

As Sarah Louise points out, NGOs need to pay salaries and support activities on the ground in-country. The time to deliver financial aid directly affects peoples’ lives. Yet sometimes it takes a week to deliver a payment, while at others it may take up to three months and this really impacts them.

“The ability to handle complex, individual payments with full transparency is where a fintech like Inpay makes a difference. We have the knowledge and expertise around particular payment corridors and what’s needed to deliver a successful payment,” thinks Sarah.

We know what documentation is required, the questions likely to be asked, and the quickest way to route payments to pre-empt problems, she says. It’s a different approach and skillset to a bank, who wouldn’t necessarily support and guide customers to that extent.

The fintech focus on smarter payments

Specialization is key. A local bank tends to specialize in offering everyday products and services, such as a bank account, savings products and mortgages. Enabling cross-border payments is not a focus, more a side offering.

“There’s no reason why local banks should be experts on other countries’ banking infrastructure,” says Sarah. “At Inpay, our focus and core strengths are different. We’re not running a bank or competing with banks. We bring transactions to banks – we’re just doing it smarter, utilizing the banking infrastructure where it makes the most sense.”

Accountability and transparency are highly relevant for NGOs. In view of their responsibilities to stakeholders, including donors, sponsors, beneficiaries, staff, states and the public. However, many businesses need the ability to execute complex cross-border payments: financial services and remittance companies, gaming operators.

Or as Sarah sums it up: “The needs of NGOs are not so different, rather it’s the destination of funds that differs.”

Access + technology + human expertise + customer service

Regulation has helped open access to bank infrastructure. While the revised payment services directive (PSD2) has turbo-charged access in the EU, there’s also the rest of the world to consider. Each country has its own banking and clearing infrastructure.

“While many companies have access to banking infrastructure locally, enabling transparency in cross-border payments is not merely an access or technology play. You need expertise in handling complex cross-border payments, combined with real customer centricity,” thinks Sarah.

There’s also a cost advantage. Sarah explains that Inpay controls the routing of the payment, so we can ensure that there aren’t unknown FX factors, or surprise intermediary bank fees. “That’s transparency of payments in action and where the provider becomes a key differentiator,” concludes Sarah.