Opening Local Bank Accounts for Global Businesses is Hard – Here’s a Great Alternative for Making Payments

Thanks to advanced workforce management technology, hiring and managing people in multiple countries has never been easier. What remains challenging, however, is making payments across borders. It requires navigating multiple foreign banking systems, each with different regulations and requirements.

Global employers usually discover that they have two options for paying a global workforce.

They can open accounts everywhere they have employees and face the different local procedures and systems, or they can work with a single fintech company that delivers global cross-border payments for them, removing the complexity.

Why it’s so hard for foreign companies to open local bank accounts

It sounds simple. Just go to any local bank and open an account. After all, you plan to use it for paying your local employees – so why should it be so difficult?

While specific challenges vary from country to country, there are typically any number of challenges for foreign companies trying to open local bank accounts.

1. Substantial qualifying deposits

In many countries, banks have different requirements for foreign companies. Some may require significant deposits from foreigners just to open an account.

Opening a bank account in Switzerland may require a management deposit of anywhere between $500,000 and $3,000,000. For companies looking to increase their working capital, a deposit that size just to open one local bank account in one country can seem onerous.

2. Extremely complicated procedures

Opening a bank account is often challenging in countries with complicated tax laws, such as Brazil.

While there are no specific restrictions barring banks from opening accounts for foreign companies, the process can be challenging. Considering the vast number of regulations, some banks’ onboarding processes can involve requirements that are difficult to meet.

3. Stringent documentation and KYC

Banks take the highest caution before opening accounts to foreign companies. They perform the strictest identity checks to be sure they’re not providing banking services to people who have been sanctioned globally, or from countries that have been sanctioned.

4. Language barriers

Banks typically operate in their local language and their forms and instructions are in that language. Sometimes documentation also needs to be provided in the local language. It can be overwhelming from abroad. But some banks also require that accounts are opened in person, necessitating a visit and navigating the local language throughout the banking process.

The danger of payments providers with manual systems

With the relentless complexity of opening a bank account for every country, it’s not surprising that many companies choose to outsource the process to payment service providers.

But in today’s age, it’s essential to use advanced technology. With so much sensitive data involved in global workforce payments, companies need to ensure the highest level of protection and automation.

A manual process leaves you vulnerable to the following:

• Data breach, including personal information protected by GDPR regulations
• Payroll errors from manual manipulation of data
• Fraud in the payment process
• Formatting incompatibilities
• Errors in payments to tax authorities

Those risks can be mitigated through end-to-end automation.

With automation, you get a unified global payment process for net salaries, tax authorities, and benefits vendors.

There is less risk of manual errors or formatting issues. You can assign role-based access permission to reduce the chance of fraud and leave an audit trail.

Your data is too precious to entrust to an unreliable manual process.

The importance of local bank accounts

Local transactions are the lifeblood of workforce payments. Either you have a local bank account or work with a third-party payment provider that can perform local payments on your behalf.

You need a local bank account (and even a local license) to make authority payments in some countries, such as Italy and Spain. Their tax offices will only accept payments from local banks.

In other countries, including Brazil and France, salary payments must be delivered from one local account to another local account. It must be initiated by the employer locally.

Local accounts also ensure proper classification of payments as salaries. Employees always know that their payment came from their employer. The classification information is often lost when it comes to cross-border payments.

Papaya Global lets you pay out across the globe

Instead of opening a series of local accounts, you can work with Papaya Global for all your global workforce payments.

Papaya’s end-to-end payments platform puts all payments data in one place for easy access, replacing the time-consuming manual work of data reconciliation. Transfers from the platform are timely, delivered on the designated land date, and have an immediate transfer rate of 95%, at half the cost of traditional banks and SWIFT wire services.

Our platform includes in-flight screening and data validation to ensure compliance and payment accuracy. The Papaya platform includes multiple safeguards that flag any unauthorized changes or fraudulent activities.

The world gets paid with Papaya Global

Papaya’s payment solutions provide high levels of speed, accuracy, control, and visibility to the process of workforce payments.

Papaya Global’s payment services are offered through Azimo, Papaya’s licensed payments arm. Azimo is a payment services provider regulated in five tier-1 jurisdictions. These licenses allow Papaya, together with its partners, to provide workforce payments worldwide. For further information on Azimo’s licences worldwide, check our licensing page.

To learn how Papaya’s payments can streamline your global payroll payments operations, book a meeting with one of our payments’ experts today.