How to avoid failed bank payments and automate your payment validation process

by Apply Financial

Introduction

With each failed payment costing businesses an average of £50 to repair, processing payments seamlessly is a priority for corporate businesses and financial institutions alike, with many keen to focus on improving Straight Through Processing (STP), and reducing their fees.

At Apply Financial, we are in the business of ensuring that single payments and bulk payments are going through every time, at the right time to suppliers, payroll and any other recipients, avoiding costly late and failed payments.

Since 2010, we have validated over £100 billion in payments and saved over £125m operational costs for our clients

1. Online payments


The digital economy has become increasingly reliant on technology to ensure faster, safer and more efficient payments.

These online transactions are occurring at a vast rate each day, yet most of them are processed manually. This poses a great threat to businesses who run the risk of incorrectly capturing payments details.

2. Why do bank payments fail?


There are two main why reasons bank payments fail:


1) Fat-finger:
A ‘fat finger error’ refers to pressing the wrong keyboard keys when inputting bank payment details. Account number and/or bank code errors make up 9% of payments and have caused billions in damage in failed payments and damaged relationships around the world.

2) Degraded data: 6% of payments fail because the beneficiary data is either invalid   or out of date. With 35% of data going out of date each year, it is unsurprising that incorrect account details are occasionally provided to the institution processing the payment.

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3. What is the cost of failed payments?


Each failed payment costs on average £50 pound to repair. This takes into consideration failed payment charges, new payment fee, internal fixing costs and exchange rate fluctuations. Such fees can mount up considerably over the course of the financial year. A business making just 8 failed payments a day will waste £100,000 per annum on fixing payments.

The time and resources that are squandered in fixing these payment errors can be significantly taxing for a business.

 

The real damage though is the bad relationship that is created when the intended recipient does not receive the money on time. For a company to succeed in today’s competitive and highly saturated marketplace, customer satisfaction must take precedence. Withdrawing the potential for human error plays a vital role in this endeavor.

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4. What is a payment validation API?


A payment validation service is a complete end-to-end capability to validate any single payment or any single payment file.

Designed to help Corporate and Financial Institutions easily validate digital bank payments, a validation API will automatically do a thorough data check to verify the account details of the payment recipients, essentially verifying that a payment can be processed through this channel before it’s initiated.

An ideal payment validation API would enable you and your customers to submit the correct bank payment details saving time and money and dramatically improving Straight Through Processing. It should also reduce the hassle of failed bank payments, managing rule compliance and fixing any damaged customer relationships.

It should also:

  • Provide domestic and international account and payment validation for domestic and cross-border payments
  • Provide up to date global payment rules for compliance
  • Automatically check and generate IBANs and BICs for domestic account details
  • Enrich payment instructions with all bank details and standard settlement instructions
  • Suggest all payment purpose codes and country by country requirements
  • Check global holiday data to avoid delays

5. How does a payment validation avoid failed payments?


 If the information is incorrect, the system tells the user - or bank if it’s using it internally - what’s wrong and suggests a means to fix it.

Highlighting any errors makes the user aware that they have made an error or that the data entered is degraded (invalid).

Making the user aware at the point of entry if the information (account number/sort code etc) is incorrect avoids degraded data or user processing errors to slip through.

This removes the need for fixing failed payments, something that’s especially important when users are conducting transactions over mobile devices, which have auto correct features enabled.

6. What makes a good payment validation service?


There are the 6 features a good payment validation service needs to have in order to save as much money and time for your business as possible:

 

1. A simple to deploy API and 24/7 self service dashboard to support it:

A good payment validation service should have a comprehensive reporting dashboard that is able to report on the number of validations being made, in what currencies, in which countries and what errors are being made - all in real time. It will also highlight immediately to the user if they are making an error and how to fix it.

 

2. Country specific requirements and global coverage

Cross-border payments can carry heavy charges if not processed correctly, which the bank will then directly charge a fee to the payer making the transfer to fix. By using global data from official sources, a good payment validation service will stay up to date on account structures, rules and data requirements, helping organisations to avoid these costs.

 

3. IBANs, Non IBAN Countries and BICs automatically checked

International Bank Account Numbers (IBANs) and Bank Identifier Codes (BICs) are not the same from one country to the next as each country has its own set of rules for IBAN structures. A good payment validation service will identify an IBAN account from anywhere in the world and provide the correct BIC, Branch Address and country code. It will also check the account structure and BIC for Non IBAN countries and provide the detail necessary to make a payment.

4. Bulk and single payment validation

A good payment validation service must apply the same quality of validation to single and large payments. It must check, enrich and suggest fixes for all payment data at once and give users the option to look closer at information on the dashboard to approve those changes.

5. Price per validation

Payment validation is about saving money for your business, so it’s important to only pay for what you need. The option to scale your service based on your business needs is crucial for making a payment validation service work for your business.

 

6. A free trial, so you can try it for yourself

A good payment validation service will offer a free trial so you can experience first-hand how it simplifies the payment process and reduces the hassle of failed bank payments automatically.

7. 3 common online payment issues APIs can solve


Account validation is integral to processing digital payments. However, an API can solve further issues that go beyond fixing failed payments.

 

1. Lack of transparency into foreign exchange rates

An API can provide insight into real-time exchange rates, offering users full transparency into the cost of a transaction before the exchange is executed — something that many traditional banking platforms don’t offer.

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2. Difficulty managing incoming payments

Under your business account, you can create a hierarchy of customer accounts or sub-accounts, which are assigned their own virtual account number and can be easily managed through an API.

3. Changing or canceling payments on short notice

APIs give your business full control over your payment options — so you don’t need to make any additional phone calls to the hosting institution in order to alter a payment or cancel it completely.

This guarantees greater efficiency, control and ease of use.

8. Payment validation for banks


Staying competitive means preserving customer loyalty

Digitalisation is driving the future of banking. From social to mobile capabilities, banks are having to rethink the way they do business to deliver a better customer experience and remain competitive. Where time and money is concerned, failure to deliver can be catastrophic for a banks reputation. Incorporating a payment validation API avoids the costs and delays associated with failed payments, therefore preserving customer loyalty.  

 

Enhanced functionality in the cloud

While banks have been reluctant to hand over these types of data services to third-party companies, things are definitely changing in the wake of digitalisation. Major banks are migrating their services to cloud providers that offer enhanced functionality and improved reporting tools, through an API which combines smart software with up to the minute global payments reference data.

 

Removes infrastructure and support headaches

Making the move away from legacy, on premise systems, which are difficult to manage, maintain and update, removes the overhead associated with managing hardware, operating systems, upgrades, updates and data integrity. This allows banks to send and receive payments quickly, cost-effectively and reliably via the cloud, with no infrastructure requirements and minimal up-front investment.

 

Improved customer security and compliance

With security and compliance at the top of every banks agenda, migrating to a cloud payment validation service ensures highly secure environments using the latest real time security solutions. Also very importantly  including making sure automated monthly penetration tests are performed to check for any new bug, phishing or hacking attempts.

To reassure the banking sector that migrating to a cloud based API will not compromise on security, some API-cloud providers are hosting their environment in highly secure private cloud environments, in many cases in the  same private cloud provider that banks store their applications. Some are taking it a step further and ensuring PCI DSS compliance and other standards are met even if not storing names and addresses.

 

Improved customer experience

A payment validation API can proactively keep Beneficiary details clean for Transfers, DD's, Payment Files and Mobile Payments. Providing customers with a seamless payment cleansing experience enables banks and Fintech’s to dramatically improve customer experience, automation and service levels.

 

24/7 support

Beyond security concerns, banks are sometimes hesitant to make the shift because of the time and effort it takes to move away from internal systems and functions. However, the best cloud providers understand the challenges for banks and provide continued 24/7 support with very stringent SLAs in place.

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9. Payment validation for corporates


With clear reporting metrics, user management and configuration tools, a payment validation API simplifies and streamlines the payment process for corporate - allowing them to deliver better customer experience, gain greater operational control and operate cost effectively.

Easy to use

  • A file cleansing solution that checks, enriches and suggests the correct fix to your bulk bank payment data.

  • A choice to delete a payment data file or store the data for regular automated checks to keep your payment data clean.

  • Seamless daily data updates are added to help you maintain clean and up to date bank codes and rules

Scalable

A payment validation API enables corporate clients to clean their payment files to make it look like the bank's own system and maintain a consistent brand identity.

Improved STP

customers only need to increase their straight-through processing by  0.25% for the service to pay for itself.

Future proof

"Our clients know that we're constantly improving the software in the background, so they're buying into a long-term relationship. They won't have to worry about keeping up to date with data changes, compliance and changes in the law, and, in the meantime, they are receiving a significantly better customer experience."

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10. Payment validation at point of beneficiary entry


The payment or transaction page is the most important interaction many businesses can have with their customers and suppliers. It might be their only interaction, but it might also be the start of a long relationship, and this can depend on how easy and secure the payment process is.

Providing customers more security with electronic over manual processes, as well as shortening the length of the transaction process, instills greater confident in doing business with your company.  

11. How to improve your STP and save money


Straight-through processing (STP) is an initiative used by financial companies to speed up the transaction process.

This is performed by allowing information that has been electronically entered to be transferred from one party to another in the settlement process without manually re-entering the same pieces of information repeatedly over the entire sequence of events.

The goal of STP is simple – reducing the time it takes to process a transaction will increase the likelihood that a contract or an agreement is settled on time and avoid manual error.

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12. What are the benefits of STP?


Straight Through Processing (STP) minimizes payment rejections and the costs associated with repair and recapture. With STP, the transaction processing time is also much shorter. Information is seamlessly passed on to the appropriate parties, therefore eliminating the potential for processing delays. A higher rate of straight-through-processing results in happier customers, happier back-office teams and improved ROI


Reduces labour intensive tasks

Managing data is a time consuming and costly activity. With STP, Information no longer passes through several people who must review and accept the data, allowing employees to employees focus on what they do best.


Removes data entry errors

Everyone makes mistakes, and when information moves from person to person, the wrong data can easily be recorded. With STP no one re-enters data, which eliminates human error and typos.


Lower costs

STP creates a shared, integrated environment with your internal systems and third party solutions which lowers costs for maintaining multiple systems.


Shared data

A business with a strong STP structure will make it so their employees can find information easier, answer customer questions faster, providing a more personal customer experience.


Routing information

In order to send certain payments, particularly cross-border payments a BIC (Bank Identifier Code) is normally required.

Also referred to as routing codes or more frequently SWIFT codes these pieces of information are the postcode to the name and address supplied by the bank  for the account number and bank code (or IBAN). Often not recorded at point of capture of account details a good bank account validation tool will supply this missing data.

 

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