Study Shows Doing Business Globally Can Increase Payment Errors
Doing business globally coupled with an “inconsistent payment process” can double payment error rates, according to a just-released study from software research firm PayStream Advisors — which was sponsored by payment solutions provider Tipalti.
The study involved a survey of more than 400 companies across various sectors. Researchers said the study “highlighted the challenges businesses are having managing their cross-border supplier payment operations.” The survey was conducted as cross-border transactions are pegged to experience compounded annual growth of 7 percent per year through 2019, according to McKinsey & Co. Driving the growth is global B2B and B2C transactions, especially in China and with online marketplaces such as Alibaba.
The study showed that more than 60 percent of respondents use wire transfers for international payments. The report also found that 63 percent “of organizations do not make payments to global suppliers as part of their standard payment run (requiring a special process, separate payment method, separate bank, or lacking a defined process).”
Additionally, higher volumes of cross-border payments correlate to higher payment error rates, the researchers said in their report. Also, inconsistent payment processes with global transactions (or using separate banking partners for various payments) are “correlated with higher rates of payment errors.”
Anna Barnett, research associate of PayStream Advisors and lead analyst on the report, said “managing global supplier payments is a time-consuming, risk-prone and arduous task. [Chief financial officers] can streamline the global payments process by instituting modern accounts payable systems, like a global e-payments platform. These systems provide corporations with the necessary toolkit to manage their complex cross-border payment operations.”
For its part, Tipalti positions itself as a solution provider for the cross-border payment market. Other providers include Adyen, Payoneer and Dovetail, among others.
“According to the study, the majority of error rates stem from inconsistent processes for handling global payments, with a disparity of almost 20 percent between both ends of the spectrum,” Barnett said in the report. “Also factoring into the error rates is payment volume, with corporations that handle a larger volume of cross-border payments having significantly higher error rates. Even when organizations separate domestic and cross-border payment runs, they still experience pains related to manual processing.”
Chen Amit, chief executive officer and cofounder of Tipalti, said “working with global suppliers is a must-do for companies who want to reach peak competitiveness. However, these companies have to contend with high payment error rates, complex tax compliance and regulatory requirements, time-consuming accounts payable operations, and fraud and financial reporting risks. It’s imperative that as companies continue to increase their global supplier bases, they put into place the right systems and processes that will scale financial operations with that future cross-border payments growth.”
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