Payments processing survey 2017: the results
FX-MM’s inaugural payments processing survey shows the critical importance of payments data accuracy for banks and corporates as they seek to grow their businesses and increase their presence across the world, writes FX-MM editor Peter Garnham…
*For this survey we distinguished between financial institutions and corporations. To be categorised in the corporate category, the respondent must work for a non-banking organisation that makes a substantial amount of payments through their daily operations. Typically this includes a range of payroll, supplier, and partner transactions. Throughout this article these types of organisations are referred to as ‘corporates’.
The survey, conducted in conjunction with Accuity in April and March this year, revealed the vast majority of corporates* believe the ability to process payments accurately has a direct effect on their organisation’s future growth and that it is a top priority for 2017. Meanwhile, despite the increase in automation in recent years, most banks remain unsatisfied with their straight-through-processing (STP) rates for payments.
The survey drew responses from 215 senior professionals involved in payments processing from the banking and corporate sector, ranging from the largest multinationals to SMEs.
95 top-level corporate respondents took part in the survey, with the majority either being treasurers or chief financial officers.
Importantly, the corporate respondents came from a wide range of industries, from the aerospace and pharmaceutical sectors, to manufacturing and transport, and also the telecoms and health sectors.
As well as a good blend of industry types, there was also an even spread of respondents in terms of company size. 38% of respondents represented firms with annual revenues of more than $100 million, while 34% had revenues of between $1 million and $100 million, with the remaining 28% representing firms with revenue of less than $1 million.
The 120 respondents from the banking sector represented individuals working in all areas of payments processing, from corporate banking, payment operations, and electronic payments, to remittances, settlements and operations.
Much like the corporate respondents, the banking respondents represented a wide range of organisations, with a full sample of answers coming from the largest global banks as well as smaller financial institutions. Indeed, 20% of respondents worked for banks with assets of more than $500 billion, with 23% from banks with assets between $50 billion and $499 billion, 26% between $1 billion and $49 billion and 31% below $1 billion.
Geographically, respondents to the survey were mainly based in Europe and North America. 25% of bank respondents, and 20% of corporate respondents, however, were based outside these mature markets and featured representatives from all regions across the globe.
The majority of banks – 39% – are active in at least 15 regions, and at least 20% serve more than 50 geographic markets. Since only 21% of the banks only process payments domestically, these results highlight the need for accurate payments data across a range of regions.
Furthermore, 40% say that their bank plans to expand into new geographies. This suggests that financial institutions need to plan how they will collect accurate payments data for these new regions in order for the expansion to be successful.
The survey also highlighted the frequency in which banks today are operating in emerging markets. Indeed, 61% of banks said they often or always route payments through Eastern Europe, 56% through Asia Pacific, 37% through Africa and 35% through Central and South America.
The need for global reach, and the increasing internationalisation of today’s business world, is also reflected in the corporate world. While just 9% of corporate respondents to the survey only send or receive payments domestically, 72% send or receive payments to up to 50 countries, while nearly 20% send payments to more than 50 countries across the globe.
Furthermore, corporates are even more likely to expand their operations internationally than banks, with 64% saying they intend to enter new geographic markets. That implies that a wide scope of payments data is critical as corporates plan for the business needs of the future.
Why does payments data accuracy matter more in today’s market landscape?
Sarkis Akmakjian, Senior Director, Product Management at Accuity, explains why it’s so important for banks and corporates to overcome the current challenges in the payments landscape.
Evolving business strategies combined with the demand to send payments into emerging markets drives the need for accurate payments that go through every time and in any location. Yet, underpinning each successful transaction is critical financial and routing data. It is not surprising, then, that many financial institutions and multi-national organisations have become more concerned with ensuring this critical information is kept up to date.
For multi-national corporations, accurate payments data is becoming a key factor in achieving strategic objectives. As the survey highlights, a growing number of global corporations (64%) are expanding their supply chain, customer base and workforce into new markets. However, this cannot be fully achieved if payments cannot be processed with certainty into those countries. Given this focus, it follows that such a strong majority of respondents (81%) understand the direct correlation between accurate payments and business growth.
Furthermore, many respondents (61%) acknowledge that their business could take advantage of new opportunities if it was less of a challenge to process payments. Therefore, they are most helped when payments data is delivered through tools that enable efficient processing.
For financial institutions, accurate routing data drives metrics like straight-through-processing (STP) rates and client satisfaction. In a market that is growing more competitive, it takes fewer delayed payments to damage relationships with clients. This pressure is reflected in over half of the respondents (51%) being unsatisfied with their STP rates. This also explains why so many financial institutions are working to minimise the risk of payments failures (42%) and protect their reputation and customer relationships (33%).
For both financial institutions and global businesses, the ability to overcome global payments challenges grows more important. Both types of businesses are looking to the accuracy of their bank and routing data to meet the pressure for accurate payments.
Mission critical for corporates
This survey revealed significant consequences for corporates from not having complete and accurate payments data for their suppliers and vendors. 58% said it led to too much time spent on manual research to correct data errors, while 31% said it led to a lack of trust and posed a reputation risk with vendors. Interestingly, 29% said it made it more challenging for their organisation to have clear cash visibility, while 25% said it led to supply chain disruption or failure.
Yet, the survey also revealed that there are clear challenges for corporates as they onboard and maintain payments data for their suppliers and vendors. 49% said problems arose when vendors did not keep them up to date when their payments data – or their bank’s data – changed, while 44% said vendors did not supply all the information they needed. Furthermore, 29% said vendors found their onboarding process too arduous and 29% also said they did not catch errors in vendor data until after a payment required repair.
Despite these challenges, the importance that corporates attach to payments processing should not be underestimated. 82% of respondents said the ability to process payments accurately had a direct effect on their organisation’s current success and future growth, while 62% said their organisation could take advantage of more new business opportunities if processing payments were less challenging. Furthermore, 87% said having greater confidence in the accuracy of payments processing would help their organisation’s cash flow visibility and cash management. For 64% of corporates, improving the efficiency of their payments operation is a priority this year, according to the survey. Indeed, the survey showed for a fifth of respondents more than 10% of corporate payments are still rejected due to incomplete information.
To reduce that figure, action would seem to be needed. The survey revealed the biggest challenges corporates faced in keeping bank and payments up to date. Nearly a third cited manual entry of data that led to errors in their master database, while another third said ensuring that payments met complex country-by-country requirements, and language requirements, was holding them back.
Bank STP concerns
For banks, 57% said their STP rate for payments was less than 95%, with 26% less than 80%. Clearly, this is a cause for concern, with more than half saying they were not satisfied with their STP rate. The most common cause of payment failure or delay at banks was incorrect or missing beneficiary details, cited by 53% of respondents, while 18% cited missing or incorrect clearing system details and 10% missing or incorrect account numbers.
Bank priorities for payment processing in 2017 were also revealed. 53% said reducing cost, time and effort was a priority, while 42% cited the need to minimise the risk and exposure of failed payments, 45% the automating of data and workflow to save time and 33% protecting organisational reputation and existing customer relationships.
There is no doubt that banks are feeling the pressure as far as payments processing is concerned. Reducing the time spent on manual or repetitive data and processing tasks was seen as a challenge by 81% of respondents, while 70% cited the challenge of balancing payment routing accuracy with speed, 75% the complexity of interpreting local regulation and 70% the difficulty of getting other banks to respond to requests for settlement instructions.
Payments are, of course, the lifeblood that underpins the global economy. Challenges remain for banks and corporates. Inaccurate data is clearly providing an obstacle to increasing straight-through-processing and realising the full benefits of payments automation. Overcoming these inaccurate data issues will reduce costs for these organisations, and also place them in a better position to take advantage of business opportunities as they expand internationally in an ever-more globalised market place.