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Do you need to use a third-party payment processor

Written by: Arshi Singh, Director of US Product, Currencycloud
Published on: July 12, 2017

Whether you’re the latest crowdfunding platform or the next online marketplace, the core focus of your business is to serve your clients well. From an operations perspective, that means providing a great user experience by ensuring every transaction is as seamless as possible. And while handling payments is necessary to facilitate any client interaction, it shouldn’t have to take your full attention.

As with most non-core functions, outsourcing this process is often an attractive option to best take advantage of your team’s finite resources. But when it comes to international payments, you’re not met with many appealing choices when looking for a provider.

Traditionally, you’re held at the mercy of large, multi-national banks to facilitate these types of transactions. And while a bank will certainly get your payment from point A to B, increased rates and incorrect payments start to become a common source of headaches for your team. But fear not! With the rise of third-party payment processors, you can efficiently outsource payments to FinTech experts and divert your full attention back to where it matters most — your own business.

The Current Payment Process

If you’re handling international payments in-house, that means you’re likely routing each one of those transactions through your bank. And when dealing with a bank to facilitate payments, there are two possible workflows for your operations team.

The first is to manually create payment instructions for each individual transaction on your banking platform. As you can imagine, if you’re handling thousands of payments per day, manually logging those payment instructions is virtually impossible to do error free. And don’t forget about the time it takes to complete.

Or, you have the option to go with a slightly more automated approach and transfer each payment host-to-host via your bank’s proprietary file format. Though on its face that might seem like a more efficient option, the required information for those files change often enough that it can be a full-time job just to keep up. It’s all too easy for an initially productive day for your operations team to turn into hours and hours spent resolving payment issues that come from missing information or incorrect file formats.

Paying Too Much for Your Payments

If you’re not a large, corporate entity with an in-house treasury management department, you simply don’t have the level of infrastructure necessary to manage currency risks and monitor FX fluctuations to find the best international payment rates. And if you’re like most companies, you honestly don’t want to have to worry about it at all. Once again, you’re left at the mercy of the rates your bank provides, and often, that means overpaying.

When routing payments through a bank, you’re essentially making each payment blind. Say you need to send a payment of 1000 euros from the United States to Germany. Only after that payment has reached its destination will you know what the exact exchange rate was for that transaction. Not only will your bank not provide that exchange rate information up front, but the rate itself is likely to be marked up anywhere from 3 to 7 percent based on how significant of a client you are. This bump results in your company paying a lot for hidden fees, which may not even be listed as a fee. But let’s get to the ones you do see.

Routing payments through a bank is typically synonymous with using international payment wires. These high value payment rails are an expensive way of sending payments across currencies and could cost as much as $30 -$60 per transaction — and of course, the bank passes that onto you. With the gig economy, we’ve seen huge increases in the volume of payments sent around the world, but the size of each of these payments is dramatically decreasing. In the past, for large multi-nationals sending millions around the world, fees on the high value payment rails made no difference. But for those users who are sending a $100 payment multiple times week? You shouldn’t be paying a $60 wire fee to facilitate that transaction.

Third-Party Payment Processors

By integrating with the right fintech partner you get the best of both worlds: you don’t have to worry about exchange rates or errors, and you get that lack of worry at a much more reasonable cost than you would at a bank.

If you are a tech company with development resources to spare, then you have the option for a one-time integration with a third-party provider through an API. Once it’s complete, payment details, recipient’s information, exchange rates and reports will all be fully automated by your third-party provider. And if your development team is strapped for time and resources, or if you don’t have a team at all, most third-party providers offer a white-label platform to complete the payment process. Either way, you can efficiently outsource payments and divert your full attention back to where it should be: on the things that earn you revenue.

Learn more about how Currencycloud can help you address third-party payments. Schedule a discovery call with a payment expert today.