Three-quarters of financial institutions lose up to US$5 million a year in customer revenue to failed payments, according to a LexisNexis Risk Solutions payments study.
The study surveyed 150 payments executives in North America, Europe, the Middle East and APAC.
More than a third of institutions incur costs above US$20 per failed or delayed payment. However, fees typically recover only US$11 to US$15.
Many of these failures result from basic data errors. For example, incorrect beneficiary information accounts for 21%.
Errors in account numbers and bank details each account for around 15%.
Straight-through processing (STP) refers to payments completed without manual intervention.
For cross-border payments, only 2% of institutions report near-100% STP. In addition, one in ten cross-border payments fails on its first attempt.
A typical institution in the study processes about 10,000 cross-border payments daily. At a 95% STP rate, 500 of these would still require manual intervention.
With an average cost of US$12.10 each, this could amount to around US$2.2 million a year in direct costs.
Failed payments also affect customers. One-third of institutions report losing 2% to 5% of customers as a result, while 90% say strong STP rates support retention.
Regionally, Europe performs best, with 92% of institutions reporting failure or delay rates below 5%.
By comparison, the figure stands at 77% in APAC and 69% in North America.
“Fragmented banking infrastructure, correspondent banking, additional compliance requirements and inconsistent payment data can create further friction, particularly in less standardised markets,”
said Vijay Nagarajan, Director of Payments Efficiency at LexisNexis Risk Solutions.
“Failed payments are often seen as an unavoidable consequence of cross-border payment complexity.
Our research shows that many failures are instead linked to identifiable issues with payment data, including beneficiary information, account numbers and bank details,”
said Robin LoGiudice, Strategic Advisor at Datos Insights.
Featured image: Edited by Fintech News Hong Kong, based on image by rahmatnurohman3881 via Magnific.
