Never Fails: Solving Failed Payments in Cross-Border Workforce Transactions 

The October 2023 edition of the IMF’s semi-annual Global Financial Stability Report noted that financial markets became optimistic about disinflation. Fast forward six months to the April 2024 report, published amid inflation that refuses to fall, and the IMF felt it was necessary to warn that if inflation remains above central banks’ targets, it could “trigger instability.”

In an unstable economic climate, businesses have a much smaller margin for error. That’s especially true for the payments function. “Controlling payment operations costs is critical against today’s backdrop of deteriorating macroeconomic conditions,” said Ed Metzger, VP of Market Planning for Payments Efficiency at LexisNexis Risk Solutions. “Operating margins are contracting as capital costs increase which leaves little room for payment failures.”

The impact of failed payments is the subject of a recent study by LexisNexis Risk Solutions. Based on insights from 400 payment executives representing leading corporations and financial institutions across APAC, EMEA, LATAM, and North America, the study provides a snapshot of cross-border account-to-account (A2A) payments and outlines the cost and operational implications of failed payments.

Key findings include:

• A global average of 14% of cross-border payments are not completed and incur charges from a banking partner.
• The average fee for rejected or repaired payments is $12.
• More than 70% of respondents are not satisfied with their payment failure rate.

The devil is in the details

Most payment failures, per LexisNexis Risk Solutions’ study, occur because of errors in bank beneficiary name and address details. When a business initiates a transaction, it provides information about the beneficiary of the payment. If the information in the business’ ERP or payments processing platform is incomplete, outdated, or doesn’t meet regulatory requirements – which happens all too often – the payment will fail.

72% of respondents still manually check beneficiary information, which helps explain the high failure rate. It also explains why 95% of executives report that payment failures impact their staff’s workload. According to the study, the average payment team size at large organizations – 10,000+ employees – is around 150 FTE. And a big part of their workload, in the context of payment failures, comes from cross-border workforce payments.

The amount of time and effort teams have to invest in repairing cross-border workforce payments is one of the indirect costs of payment failures. Another indirect cost is employee attrition. Studies have shown that payment culture can impact attrition; according to research by the National Payroll Institute, more than 90% of Canadian workers would look for a new job if their pay was regularly delayed – which is inherent in failed payments.

Avoiding the direct and indirect costs of failed payments requires, first and foremost, end-to-end payment automation. According to Ed Metzger from LexisNexis Risk Solutions, the easiest path to automation is “integrating advanced payment solutions that put the payments function in an optimal position to create enterprise cost synergies and contribute greater overall value.”

Eradicating failed payments

One such solution is Papaya Global. The only unified payroll and payments platform, Papaya developed the first technology explicitly created for paying workers across borders: the Workforce Wallet. Supporting all employment categories – payroll, EOR, and contractors – the Workforce Wallet accelerates payment processing by 80%, boasts a 95% same-day delivery rate, and reduces failed payments to less than 0.1%.

Papaya’s success in eradicating failed payments results from reducing manual processes to the bare minimum. It starts with our AI-powered HCM Cloud Connector. This cutting-edge tool allows clients to integrate data from any system 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
• 30% reduction in payroll processing time
• 95% decrease in manual data syncs

When payroll and payments are unified under one roof, the process can be automated end-to-end. Payment information syncs seamlessly through the platform when a change – for example in bank beneficiary name or address details – is registered at any point in the process, eliminating unnecessary handoffs, minimizing manual effort, and enabling seamless transfer of data throughout the journey.

“In a climate where businesses need their money to work harder than ever,” concluded LexisNexis Risk Solutions’ Metzger, “Organizations expect the payments function to contribute greater strategic value at the enterprise level by helping extend capital efficiency.” Elevating the efficiency of your workforce payments – the biggest expense at most companies – would be a good start.