Why does it still take days for banks to trace and correct failed payments?

by Roland Brandli, Product Manager, TLM Aurora | 12 January 2023

In a few short years the payments landscape has undergone a revolution. A cross-border payment that once took days now requires a couple of hours; instant payment volumes grow ceaselessly. A single cross-border payment message can transit multiple payment rails, domestic, regional and cross-border, to reach the final beneficiary. Our increasingly digital world has changed customers’ expectations: people want high speed and good service, they may also complain publicly, e.g. via social media, if service levels are poor.

Unfortunately, when payment processes do go wrong, the banking industry’s response still largely belongs to the analogue era. Exception management processes are mostly manual, time-consuming and complex exercises: it may take banks days to trace and correct a problematic transaction. Understandably, customers may wonder why, when a payment can be made instantly, fixing a failed one should take so long.

Sorting out these failures represents an immense cost for the finance sector. Industry estimates suggest that two million transactions fail daily across the globe, with each one costing 40 euros to fix. Exceptions also expose banks to financial, operational and reputational risk.

The existence of numerous payment providers and infrastructures (each with its own rule book and prescribed workflows for tackling exceptions), as well as a variety of message formats, means that the backdrop against which banks investigate exceptions is highly complex and fragmented. Many banks’ have teams organised by payment provider and infrastructure to handle payment investigations. This leads to non-standard ways of doing work, often leading to inefficient processes. This complexity also undermines their efforts to improve processing speeds and reduce costs.

A number of firms, predominantly large Tier 1 organisations, have responded by investing in sophisticated CRM systems. This technology tends to be costly and complex to install, and  consequently remains out of reach for smaller or less affluent institutions.

Mindful of the pressing industry need for an easy-to-adopt and affordable alternative, SmartStream has developed TLM Aurora Advanced Payments Control. It is a single, integrated solution which standardises operations and consolidates exception handling for different payment rails and formats. The solution automates a large part of the exception management process for SWIFT and RTGS systems, provides full visibility across payments – a single line of sight across multiple payment rails, and helps to reduce exception turnaround times, costs and risk. Additionally, it is task-oriented and easy to use, assisting back offices to boost productivity.

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