What is straight-through processing

What Is Straight-Through Processing (STP)?

Straight-through processing is an automated process done solely through electronic transfers with zero manual intervention. Any company involved with straight-through processing must have the right systems and technical networking in place for efficient STP. In general, almost all electronic payment processing is considered STP.

How is Straight-Through Processing different from traditional payments?

Traditionally, sending money involved several parties for initiating and receiving transfers. Payment would first be initiated through a phone call or software program. The payment settlement details would then be confirmed by a person at both companies whether by phone, email, or fax. Then, settlement details were manually entered into a payment system and later confirmed by a supervisor to ensure accuracy.

Before ACH and SWIFT, payment transactions were sent through a telegraphic message using a special code. The process could take anywhere between several hours to a few days to initiate and had a higher risk of errors, delays, and high costs.

STP streamlines the accounting process for companies, reduces the number of errors involved with accounting functions, and improves cash flow efficiency. It has also improved business analytics, since companies can track client behaviors, spending patterns, and delays or errors by the customers or the system.

What’s an example of how STP works?

In e-commerce, STP allows businesses to authenticate customers on the web, sell them products, initiate payments, and set delivery. E-commerce sellers can partner with Visa, Mastercard, Discover, PayPal, and so on to offer products and services to customers through a single point of sale.

Which businesses use STP?

Midmarket and large enterprise businesses with comprehensive payment processes use STP, though any company wanting to replace paper-based accounts receivable with digital, remote-friendly systems can also use STP. Amazon is one example of a business that uses STP to serve customers and drive revenue.

Many businesses use third-party vendors to provide electronic payments. An STP system can meet compliance standards and save resources for other critical tasks.