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10 Important Payments that Cannot Wait

Sarah Pease | April 26, 2022

Every finance organization has been there: waiting for confirmation that a critical payment has officially been received. Sweating it out until a vital funding request successfully arrives at its destination, constantly checking and rechecking for a payment acknowledgement, or having the eyes of the entire C-suite on them until a major acquisition payment has been received.

FedEx has been tracking packages in real-time for 43 years, why can’t corporate finance teams moving millions of dollars do the same for critical payments? Until now.

With the ubiquity of bank APIs and real-time bank data, there are no reasonable excuses for finance professionals to accept anything less than real-time payment tracking. Thanks to bank APIs, corporations can now access real-time payment traceability from end-to-end: from payment initiation by payor to receipt by payee.

Critical payments can take many forms, However, some types of payments require maximum confidence. Here are 8 examples of important payments that can be tracked and confirmed immediately from end-to-end with the help of multi-bank API connectivity:

#1: Acquisitions or mergers where terms dictate specific payment timing  

A respected Assistant Treasurer of a major nonprofit organization once quipped that if treasury is doing their job right, nobody notices. But at the completion of a major merger or acquisition, all eyes are on treasury because the final step is to transfer the payment(s) stipulated by the agreement. These payments must be received by a specific date and time. Should the company fail to send payment by the agreed-upon deadline, the best case scenario is a major disruption to the deal and an embarrassment to the company. At worst, it could kill the entire deal.

With legacy bank connectivity, finance teams waste valuable time babysitting these crucial M&A payments. Because file-based connectivity is slow and prone to errors – it relies on manual processes and payments frequently get hung up, delayed or go missing on their path to their destination. This obscured payment status creates unnecessary anxiety , just when all eyes are on the office of the CFO office to get this M&A payment right.

Want maximum-confidence payments? Learn more about bank API-powered payments

Enter multi-bank API connectivity. When a company advances to bank API connectivity, payments can be acknowledged, confirmed, and tracked in real-time. No more waiting for a payment status file that may never come back or the need to make a phone call to the counter-party to confirm that the payment arrived successfully.

#2: Debt payments where penalties are imposed for late payments

Like most bills in life, there is a penalty for paying debt payments after the due date. Even if the finance team can prove that they sent it on time, and the payment was simply hung up en route to the beneficiary because of business continuity risks with file-based connectivity, the fact remains that the payment was not received on time, and a penalty is assessed.

The uncertainty of payment status is itself a major challenge, but there are further impacts to this connectivity shortcoming. Because finance teams cannot truly rely on a vital payment arriving at its destination when expected, payments are often sent earlier than necessary to protect against late payments. Sending a payment early means the company loses out on putting that money to work – investing it one extra day, for example – because legacy bank connectivity channels are unreliable.

Finance teams can eliminate the risk of late debt payments and associated penalties by using bank API connectivity. Some API-ready tools also produce immediate notifications should a payment fail to process.

#3: Urgent intercompany funding requests where an entity has time-sensitive payables

A seasoned finance practitioner at a major international retailer recently shared that a funding request sent on a Friday afternoon had failed. Their legacy treasury workstation automatically tried the payment again 15 minutes later, but the host-to-host connection remained stalled. By the time this transpired, he was already home for the weekend, and the money never reached its intended destination. Because legacy connectivity doesn’t provide immediate traceability, he had no way of knowing that it had not gone through before he left the office. He logged in on Monday morning to a nightmare: the target account was overdrawn by millions of dollars and the company was hit with significant overdraft fees. In a sense, they were lucky – the bank paid the overdraft, so the consequences were limited to just fees. Unforeseen expenses and reputational damage are a major risk when payments aren’t received on time.

For companies that use bank API connectivity, the finance team gains total confidence about the payment status. API connectivity is a synchronous communication channel: when payment instructions are shared with banks, an immediate response confirms reception of the instructions. When banks process payment instructions, the latest status along the whole processing chain gets immediately visible to finance teams. With some API-ready treasury tools, you can even view the bank fees charged at each payment step, allowing finance teams to track the fees they’re paying and validate the final amount delivered to the beneficiary.

#4: Tax Payments

If you fail to pay the tax man on time, there will be serious consequences. Whether it’s state, local, federal, international taxes, payroll taxes, sales taxes or any other kind of taxes, late tax payments will always result in fines, and could result in more severe penalties beyond just late fees, such as revocation of business licenses.

#5: Customer Refunds

The emergence of consumer protection agencies have given way to a rise in regulations governing customer refunds. Whether the rules are enforced by Singapore’s 2003 Consumer Protection Act, the ECC in France, the Bureau of Consumer Protection in the US or any other government around the world, the speed of customer refunds is increasingly monitored and companies must comply with local regulations.

Eliminate missing or failed payments with instant payment traceability

As we’ve discussed, bank API connectivity delivers immediate confidence in payment status. Companies can have total certainty that a refund has been delivered on time and to the correct beneficiary. Some API-ready tools can even automatically route payments via the fastest delivery method – like a domestic payment network – and permit companies to offer disbursements to PSPs like PayPal, Venmo in America, or Asia’s Grab, without the cost and hassle of maintaining a spaghetti junction of connectivity channels.

The buck stops here

Any type of B2B payment can be sent via bank APIs and there are more than 22 banks with active payment initiation and status APIs today. Today’s corporate payment initiation & payment status bank APIs are offered by global household names like Barclays and Wells Fargo, to boutique and regional banks like Raiffeisen Bank or PNC, and the list is growing every day thanks to open banking regulations, gaining ground from retail banking to transaction banking. A few more examples of the types of time sensitive critical payments handled by finance teams that demand maximum-confidence traceability are:

6. Funding of FX settlements where the bank is expecting delivery of the sale currency before releasing the foreign currency to the target account
7. Trade loan settlements
8. Treasury deals
9. Dividends
10. Fines

What types of critical payments would you add to this list? No matter the type of payment, it’s clear that bank APIs offer the corporate finance & treasury community real-time payment traceability – something that consumers have been benefitting from for years in everything from package deliveries to food orders. These new capabilities will give countless finance practitioners the peace of mind they’ve been waiting for, and give companies the opportunity to do more with their cash and better support and protect their business operations.