Five challenges stopping businesses from scaling payouts globally

More and more businesses are looking overseas in search of growth. To do that, they need a globally scalable way to pay vendors, employees and customers. If they don't, they risk costly delays to expansion and losing market share to businesses that can move quicker.

But scaling payouts globally is often easier said than done. This article discusses how payouts cost, complexity and compliance have held businesses back from expanding globally and unlocking their full potential.    

Technical complexity

A costly challenge facing businesses making cross-border payouts at scale is the amount of technological infrastructure required to send money where it's needed. With few payment providers offering anything close to global coverage, it's not uncommon for businesses to need to integrate with multiple providers.

Building and maintaining these connections isn't only burdensome and costly. It also has downstream ramifications for other departments in the business, forcing teams looking after reporting, compliance and treasury to adjust their process to fit the data flow of each system. All this causes them to spend time working through manual, repetitive processes rather than supporting business growth.

The technical complexity of using multiple providers can also negatively impact the payee experience. All payouts require compliance checks. And when these are conducted manually, there's a greater chance of payout failure from false-positive results or user error. These errors either slow down the speed of payout or stop customers from receiving their money altogether.

Data formatting is another overlooked area of complexity. To avoid rejection and return scenarios, businesses must ensure transaction data is formatted correctly to be handed off between various financial institutions.

Fragmented customer experience

Instead of thinking about global payouts as simply setting up payout routes, businesses should plan their payouts around improving the customer experience for payer and payee alike.

On the back-end, this can include:

• Automating data reformatting to ensure payout data can be ‘read’ by systems applying different standards
• Using smart payout retries and intelligent rerouting
• Leveraging enhancements in fraud prevention software

On the payee front, providing customers with a payout experience that gives them control of how they are paid and certainty of when they’ll get their money are two improvements businesses may look to employ.

Most legacy payout services were not created with payee experience in mind. They're typically reliant on old banking systems built to support domestic transitions and don't seamlessly integrate with other countries' networks. Data also doesn't smoothly flow from one system to another, creating unnecessary failure points. And when payouts fail, it's the payee that's left frustrated and looking to take their business elsewhere.

Cost transparency

Global expansion tends to mean a higher volume of cross-border payouts — and so more exposure to the murky world of bank charges and unknown FX rates. Whereas these costs can go relatively unnoticed or seem small compared to the transaction size, they soon add up and can cause a big dent in revenue.

While foreign exchange cost is a reality of cross-border transactions, transparency of fees and rates allows businesses to take a proactive approach in managing their exposure to these costs. Having access to the real-time exchange rate enables businesses to accurately predict the transaction cost and take decisions on processing their transaction at the point in time.

Another element of transparency that affects cross-border transactions is a result of multiple parties applying transaction fees. Intermediaries step in to facilitate the path of every global payout, with each charging a fee for their service. And the more complex the payout, the more corresponding institutions, the higher the total fees incurred by the business.

Compliance know-how

To send payouts anywhere, businesses must be compliant everywhere. But regulations for overseas jurisdictions can be hard to navigate and add additional complexity to the mix, like screening against new sanctions lists. Fraud can also take unfamiliar forms.

And without expert know-how in every market, there's potential to incur expensive fines, reputational damage and trading restrictions.

The issue is that few businesses have the resources or ability to become experts in global compliance. Some may do their best and implement blanket rules to flag or reject suspicious transactions. But this risks doing more harm than good.

Businesses must therefore rely on their payouts provider to be that expert. But ensuring global compliance is just table stakes. The best providers give visibility when a payout is stopped for compliance checks and have processes to clear the majority of issues without the business needing to do anything. And when the business does need to provide additional information, it should be clear what's required and simple to supply.

In-country expertise

Compliance is not the only element of a scalable payout operation requiring the joint forces of technological superiority and people power. Ultimately, global scale is the sum of getting it right locally, over and over again. And the differences in each market — from the banking networks to regulations, consumer preferences to payout schemes — demand different approaches.

For most businesses, it's unrealistic to set up an operation in every country they make payouts to. So the choice is between implementing a one-size-fits-all approach to global payouts and taking a risk on not getting it quite right in some countries or partnering with a solution provider that can support the business with local know-how and presence.

Unlock global payouts at scale and without complexity

At the heart of the challenge of scaling payouts globally are delicate balancing acts. Questions that businesses must answer include:

• How to invest in technology that enables them to extend their current capabilities without adding operational complexity?
• How to embed local expertise needed to be successful in different regulatory, behavioral, and technical challenging markets without incurring the costs of putting feet on the ground?
• How to go to market faster with payout solutions?

These questions were hard to answer in the past. But now, businesses have options. They can choose to stick with the status quo or work with a payouts provider that can unlock global payouts at scale and without complexity.

Find out how Checkout.com's next-generation payouts solution unlocks global coverage, compliance, choice, flexibility and visibility through one seamless API integration.

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