Climbing the corporate workforce payments ladder

Business corporations were first formed in England in the 16th century, but only in the late 19th century did they start to resemble the entities we know today. Known as the most flexible instrument for large-scale economic activity, corporations dominate most sectors, including technology, manufacturing, energy, and the service industry.

While corporations get credit for contributing to innovation, there is one area in which they have traditionally lagged: payments. Until the COVID-19 pandemic, most corporate payment processes were manual and paper-based, leading to long turnaround times and low efficiency. The past couple of years, characterized by digital transformation, have revolutionized corporate payments in many respects, but challenges remain.

A recent report by Deloitte details the main challenges in various types of corporate payments: vendor payments, supplier payments, cross-border payments, and salary payments. This blog post delves into these pain points, focusing on global workforce payments, and offers solutions to the inherent problems in this domain.

Limited visibility on cross-border payments

“Traditionally, corporates have lacked real-time information on payment transaction status, especially when multiple intermediary parties are involved. In addition, very often corporates are unable to get a transparent view of the fees being levied by correspondent banks for processing cross-border payments.”

This is especially true in cross-border workforce payments. Most international organizations rely on banks or payment service providers (PSPs) to deliver salaries and wages. PSPs and banks deliver salaries and wages via traditional payment rails, which typically involve using intermediaries (correspondent banks or payment processors), driving up costs in the form of hidden exchange rate markups.

Papaya Global, the only unified payroll and payments platform, went a different route. Relying on partnerships with tier-1 banks such as J.P. Morgan Chase and Citi, Papaya established the first workforce-dedicated rails. On Papaya’s rails, all fees are known in advance, allowing us to reduce currency conversion costs significantly.

The FX rate Papaya charges consists of two components: the FX processing fee and the reference rate. The reference rate is the mid-market rate – i.e., the mid-point between the rate a currency can be bought and sold at the time of the transaction. The final FX rate of each transaction can be verified in real-time, ensuring full transparency.

Lack of aggregated view

“Corporates have complex organizational structures, with regional offices spread across the globe. Each regional office prefers to use its local bank account for payments to vendors and employees, as well as for the management of internal expenses. In addition, corporates have multiple banking relationships and use different bank accounts to process their payments. Hence, keeping track of collections and payments becomes a challenge, leading to a lack of aggregated view of fund positions across multiple bank accounts.”

In contrast with this fragmented process, Papaya offers the first centralized technology designed to enable international companies to transfer workforce payments across the globe via direct deposits. Supporting all employment categories – payroll, EoR, and contractors – Papaya’s platform allows corporates to store funds in a segregated and secure account, which they can manage and view from one screen.

The way it works is simple: as a regulated financial services company, Papaya provides each client with a designated Workforce Wallet that can be used to pay its entire global workforce, local tax authorities, and benefits vendors. Clients can fund their wallets in 14 currencies and transfer payments in over 100, ensuring that salaries and wages are delivered in your workers’ local currency.

Inconsistent payment experience

“Corporates have complex payment requirements. They need to make payments to their suppliers, subsidiaries, and employees, all of whom can be spread across multiple countries. To support these diverse payment needs, banks must set up multiple teams/payment systems, which at times could lead to an inconsistent experience for corporate customers.”

With mostly outdated legacy systems, intentionally slow compliance procedures, and a conservative culture, banks are not well-positioned to address diverse payment needs. On the other hand, fintech companies – like Papaya Global – focus on a specific niche, solution, and target audience, providing a consistent experience.

A good illustration of that is customer queries. Papaya’s comprehensive customer service, known as Papaya 360 Support, assigns each client a dedicated account manager. The account manager coordinates with Papaya’s team of payroll and payment experts to ensure clients’ needs are met efficiently and effectively. Completing the white glove service is our in-house legal team, which provides consultation whenever necessary.

Complex integration requirements

“Corporates have multiple banking relationships and rely on multiple communication mechanisms, such as host-to-host integration between their ERP systems and banks’ backend systems to make payments. This integration is complex and time-consuming for both corporates and banks with challenges related to security protocols, file formats, and communication protocols.”

Making cross-border workforce payments requires integrations with multiple systems. That’s why Papaya built an AI-powered cloud connector. This cutting-edge tool allows clients to integrate data from any system – including ERP software such as NetSuite, Oracle, and SAP – in an hour (!) and connect it all under one dashboard, which functions as the heart of your workforce payments operation.

Our numbers speak louder than words:

• 90% decrease in data implementation processing time
• 95% decrease in manual data syncs
• 45% increase in cycle efficiency

Cumbersome bank statement reconciliations

“Corporates must maintain large accounting teams for the reconciliation of their bank statements with ERP accounts, as it is a time-consuming and complex process.”

Payroll processing and making cross-border workforce payments are the two middle steps of a process that begins long before payroll is calculated and ends only when journal entries are added to an ERP system and all the data is reconciled.

Following a one-time mapping process, Papaya’s platform customizes the JE for the client’s ERP system. The JEs are generated automatically once the client approves its payroll summary, saving an average of 15-20 hours of manual work per cycle and ensuring error-free reconciliation.