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TREASURER’S GUIDEBOOK

11 Global Payment Formats: The Treasurer’s Guide to a Preferred Payment Mix

This ebook outlines the 11 most widely used payment formats that treasury teams across the world should be aware of and accept to constitute a healthy payment mix

CHAPTER 01

Executive Summary : The wave of change in payment mix

Businesses are going global! 

According to a joint survey by CRF-NACHA, 79% of the business organizations are shifting towards a global business model.

The same survey states that 79% of the organizations anticipate the volume of international payments to increase by 2020.

What does the global payments snapshot look like?

On analyzing various payment methods used across countries, specially in the Americas and EMEA regions, we have identified the top 11 most widely used payment methods, represented in this map.

Treasury teams of global enterprises should make it their topmost priority to not only accept these payment formats from customers, but accept them in an optimized environment for ensuring cost-effective acceptance, adherence to security policies, and scalable cash application.

Framework for evaluating payment types

The top parameters that treasury teams should evaluate different payment methods are:

Security: 

Deep-dive on the government-issued security measures, possible payment frauds and tips to prevent them.

Time for Processing: 

Analyze the settlement speed for national or cross-border transfers such that the payment hits your books on time.

Cost of Transaction: 

Find out the cost of acceptance for arriving at a cost-effective payments mix.

Remittance Mode:

Identify various sources of remittances and form workflows to reconcile remittances in a standardized format.

In the next chapter, we will discuss the 11 most widely-used payment formats which are prevalent in the B2B payments ecosystem

 

CHAPTER 02

11 Global Payment Formats

ACH Payments

Security:

ACH transactions are regulated by Federal law and NACHA administers the security through:

  • Encryption of account information
  • Verification of routing number during origination
  • $25,000 restriction per transaction
  • Micro-deposit and secure vault payments are made into customer’s account for account verification prior payment transactions

The possible ACH frauds include:

  • Phishing scam due to leakage of account information
  • ACH kiting fraud due to time lag in transactions, leading to misplaced funds

Tips to prevent ACH frauds:

  • Keeping account information confidential
  • Not responding to unfamiliar payment requests

Cost of Transaction:

Median cost of sending and receiving payments varies between $0.27 to $0.29

Remittance Mode:

The remittances are sent through the following channels:

  • Emails
  • EDI
  • Web portal uploads
  • Along with the payment

Time for Processing:

Time for processing ACH payments is approximately 3 business days.

In case of a Same-day ACH, payment is processed within 3 hours

 

ACH is gradually expanding across Europe with the International ACH initiative of NACHA

Wire Payments :

Security:

Wire payments are considered to be safe. Possible information breaches include:

  • Phishing scams due to leaked account information
  • Family emergency scams leading to authentication mishaps

These are the tips to prevent possible wire payment frauds:

  • Proper verification of receiver credentials
  • Restricted transactions to unknown beneficiaries
  • Keeping account information confidential

Cost of Transaction:

Median cost of sending and receiving payments varies within $4.25 to $7.64

Remittance Mode:

The remittances are sent through the following channels:

  • Emails
  • EDI
  • Web portal uploads
  • Along with the payment

Time for Processing:

Money would be transferred within 1-2 days. It depends upon how early the request has been submitted. For international transfers, it might take more time.

Sometimes, the receiving banks also take time to reflect the amount in their accounts

Many banks are shifting towards multi-level authentication to prevent wire scams in future

Check Payments :

Security:

Checks are vulnerable to frauds. Every information needed by the hacker is mentioned in the check (account number, name, bank routing number).  Check forgery is the #1 reason for frauds.

Tips to prevent check frauds:

  • No signing of random blank checks
  • Proper communication with banks to inform misplaced checks
  • Integration with a trusted vendor to mail the checks

Cost of Transaction:

The median cost of accepting a check  is $1.57

Remittance Mode:

Remittances are sent in the format of check-stubs. The bank charges additional lockbox key-in fees for SKU-level key-in of the remittance advice to the supplier

Time for Processing:

Banks take 5+ business days to process a check. The delay is mainly due to check float and bank’s delay because of the volume of checks that need to be processed.

The amount is reflected in the supplier’s account in absence of a fraud.

In case of a fraud or check bounce, sensitive customer data could be stolen and misused

Checks continue to remain 50% of the payment formats irrespective of electronic payment formats evolution

Credit Card Payments :

Security:

Credit card payments have been exposed to multiple frauds such as:

  • Application theft
  • Credit Card Imprint theft
  • Lost and Stolen Card fraud
  • Fake Cards fraud

PCI DSS compliance and processor tokenization ensure secure credit card processing

 

The following factors prevent security breach during a credit card payment:

  • Non-disclosure of credit card data
  • Prevention of transactions with suspicious merchants
  • Formation of strong authentication details

Cost of Transaction:

Median cost of receiving credit card payments varies within 0.50%—1.99%

Remittance Mode:

The remittances are sent through the following channels:

  • Emails
  • EDI
  • Web portal uploads
  • Bank statements

Time for Processing:

It could take 2hours to 3days to process a payment.

Level III processing of transactions could cut credit card processing costs by up to 40%

Virtual Card Payments :

Security:

Virtual cards are one-time cards. These cards have a 16-digit card number and CVV format similar to credit cards. After its designated dollar limit is exhausted, the virtual card becomes invalid.

In case of a fraud, the intruder would not be able to trace the number for further information. This makes virtual cards more secure than credit cards.

Cost of Transaction:

Virtual card payments come with high interchange costs.

The reported median cost range for outgoing card payments is  $1.00—$1.99

Remittance Mode:

The remittances are sent through the following channels:

  • Emails
  • EDI
  • Web portal uploads

Time for Processing:

It takes approximately 3 days for the settlement of virtual card payments

Since virtual cards are meant for one-time use, PCI DSS compliance and storing the card data in a secure environment is not a huge issue which was applicable in case of credit cards

Real Time Payments :

Security:

Following scams could be encountered in RTP:

  • Account takeover fraud leading to sensitive information leakage
  • Application fraud due to fraudulent creation of application

Real time payment does not allow direct access of any bank account information to the other party involved. To ensure a more secure environment, Tokenization should be enabled on payment accounts

Cost of Transaction:

TCH is authorized by the RTP participants to process TCH fee debits and RTP incentive debits

Remittance Mode:

The remittances are sent through the following channels:

  • Along with the payment
  • Emails
  • EDI
  • Web portal uploads

Time for Processing:

Real time payments are processed in seconds

According to PNC, 25% of US companies have plans to implement Real Time Payments within a year

BACS Payments :

Security:

BACS transfers are considered to be safe due to the following reasons:

  • BACS uses SSL-encrypted Bacstel-IP which requires strong authentication before the payment is processed
  • BACS ensures that only authorized organizations take part in Direct Debit scheme
  • BACS ensures safety against fraudulent transactions with Direct Debit Guarantee

Cost of Transaction:

In case of BACS payments, the cost per transaction is 0.23 euros

Remittance Mode:

The remittances are sent through the following channels:

  • Emails
  • Web portal uploads

Time for Processing:

BACS Direct Credit and Direct Debit payments are processed within 3 working days

According to a NPSO report on May 1, 2018, the operational responsibility for BACS has been transferred to New Payment System Operator(NPSO)

SEPA Payments :

Security:

SEPA provides convenience and standardization against national and cross-border payments. The common reasons for SEPA scams include:

  • Minimal authentication in SEPA Direct Debit leading to fraudulent transactions
  • Multiple touchpoints in IBAN/BIC migration leading to data manipulation

SEPA payments are regulated by European Union. International Bank Account Number(IBAN) and Business Identifier Code(BIC) are used as standards for payment authentication.

Tips to prevent SEPA scams:

  • Proper tracking of IBAN migration
  • Implementing more security checks during a direct debit scheme

Cost of Transaction:

The cost per transaction is approximately 4 euros

Remittance Mode:

The remittances are sent through the following channels:

  • Emails
  • Web portal uploads

Time for Processing:

SEPA takes around 3 days to process the payments. However, SEPA Credit Transfer takes maximum 1 day and SEPA Instant Credit processes the amount instantly

SEPA is expanding its partnerships in various banks in different countries such as Nordea in Finland, BPCE in France

CHAPS Payments :

Security:

CHAPS payments are widely used in UK and other parts of Europe. Frauds are usually rare in a CHAPS payment, however, some common instances include:

  • Unauthorized fund transfer due to account takeover

CHAPS payments require account holder’s authorization such as sorting number, account number before payment processing.

Tips to prevent CHAPS frauds:

  • No sharing of account information
  • Immediate reporting on facing a fraudulent transfer for refund from the bank

Cost of Transaction:

Per transaction, CHAPS charges 25  pounds. It is expensive due to its same-day payment  processing. However, for a platinum banking partners, there is no charge

Remittance Mode:

The remittances are sent through the following channels:

  • Emails
  • Web portal uploads

Time for Processing:

CHAPS payments are processed the same day provided the payments are submitted and received by CHAPS by 2pm on a working day

According to a report, CHAPS is planning to hit 43.5 million transactions in 2026

 SWIFT Payments :

Security:

SWIFT transfers involve payment orders instead of involving funds directly. Although they are considered to be safe but some common frauds could be due to:

  • Wrong recipient information leading to funds getting misplaced
  • Multiple bank layovers facilitating hackers to intrude

After multiple security breaches, SWIFT has tightened its bank policies with strong authentication and encryption. The tips to prevent SWIFT transfer frauds:

  • Double-checking the recipient information
  • Not getting involved into any suspicious transfer

Cost of Transaction:

In case of SWIFT payments, the cost per transaction is approximately 25 pound sterling

Remittance Mode:

The remittances are sent through the following channels:

  • Emails
  • Web portal uploads

Time for Processing:
If the payment request has been made on a business day before the bank’s cut off time, it would be processed on the same day or else, the next day

SWIFT has announced the integration of Payment Controls, an intelligent solution to ensure additional security to SWIFT payments

E-wallet Payments :

Security:

In e-wallets, every transaction is processed with encryption. So, customer’s account details are not directly provided to the merchant.

The common frauds include:

  • Theft of customer identity
  • Account takeover using loyalty programs as a tool

Tips to prevent e-wallet frauds:

  • Implementation of multi-factor authentication such as PIN, biometric for additional security
  • Implementation of AI to identify customer payment patterns, in order to reject fraudulent transactions

Cost of Transaction:

E-wallet processing depends upon the  vender involved. For example, for Paypal, there is a fee for

cross-border transactions. For Apple Pay, while making the payment, if credit card is linked, then 3% of the transaction amount is charged

Remittance Mode:

The remittances are sent through emails

Time for Processing:

The amount is processed in seconds

Local e-wallets such as Payconiq, Payback, Paylib, Pingit, Vipps, Mobile Pay are gradually paving the path towards a healthy e-wallet landscape in Europe

CHAPTER 03

Arriving at a Preferred Payment Mix

Payment Acceptance Costs: Factors to Consider :

Bank Markup Fees :

During payment transfers, banks usually charge a markup fee. The markup price varies according to bank policies, credit rating.

Comparison of bank markup fees is crucial to analyze the bank partnerships

Cross-Border Fees :

For international transfers, a cross border convenience fee is charged. Eg, 1.20% for Visa and 1.00% for MasterCard. Thus a payment method with low or zero cross-border fees should be adopted. Eg, SEPA payments

Visibility :

Treasury teams are responsible for reporting the cash on hand figures to the finance leadership. Consolidating the cash balances across accounts is could be one reason why treasury teams are hesitant to support too many payment formats.

Buyer Credit Score and Dollar Amount : 

Depending on the buyer credit score and dollar amount, a preferred payment method could be recommended. Eg, a low-risk customer having a low invoice dollar value could be convinced to pay using a low-security payment method but a high-risk customer having a high invoice dollar value should not be approached that way

Processing the Payments :

Auto-Remittance Aggregation :

A system should exist to ensure auto-aggregation of remittance advices from the following sources:

  • Emails: remittances could be present in the body of the email or in the form of an attachment
  • EDI: remittances could be sent in various EDI formats such as EDI 820, EDI 823
  • Web portal uploads: remittances could be uploaded in customer or third party portals

AI-based Remittance Matching :

The system should ensure seamless matching of remittance advice with the payment file received. Any change in the format of remittance or the data that is sent in the remittance should not affect the straight through processing rate of the cash application process.

CHAPTER 04

Standardized Cash Application Process

CHAPTER 05

About HighRadius

HighRadius is a Fintech enterprise Software-as-a-Service (SaaS) company. The HighRadius™
Integrated Receivables platform optimizes cash flow through automation of receivables and
payments processes across credit, collections, cash application, deductions, electronic billing and
payment processing.

Powered by Rivana™ Artificial Intelligence Engine and Freda™ Virtual Assistant for Credit-to-Cash, HighRadius Integrated Receivables enables teams to leverage machine learning for accurate
decision making and future outcomes. The radiusOne™ B2B payment network allows suppliers to
digitally connect with buyers, closing the loop from supplier receivable processes to buyer payable
processes.

HighRadius solutions have a proven track record of optimizing cash flow, reducing days sales
outstanding (DSO) and bad debt, and increasing operational efficiency so that companies may
achieve strong ROI in just a few months. To learn more, please visit www.highradius.com

HighRadius’ Integrated Receivables Platform

Integrated Receivables optimizes accounts receivable operations by combining all receivable and payment modules into a unified business process. The Integrated Receivables platform provides solutions for credit, collections, deductions, cash application, electronic billing, and payment processing – covering the entire gamut from credit-to-cash.

The HighRadiusTM Integrated Receivables platform stands out by enabling every credit and A/R operation to execute real-time from a unified platform with an end goal of lower DSO, reduced bad-debt, and faster dispute resolution while improving efficiency and accuracy for cash application, billing, and payment processing.

HighRadiusTM Integrated Receivables leverages RivanaTM Artificial Intelligence for Accounts Receivable to convert receivables faster and more effectively by using machine learning for accurate decision making across both credit and receivable processes. The Integrated Receivables platform also enables suppliers to digitally connect with buyers via the radiusOneTM network, closing the loop from the supplier Accounts Receivable process to the buyer Accounts Payable process.