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2) Degraded data: 6% of payments fail because the beneficiary data is either invalid or out of date. With 35% of data going out of date each year, it is unsurprising that incorrect account details are occasionally provided to the institution processing the payment.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