CU Best Practices for Global Payments: Guest Opinion
Credit unions often find it difficult to provide international payment services to their members, the demand for international drafts, wires, international ACH and encashment of foreign receipts grows daily as global trade becomes an increasingly important part of business for companies and individuals.
The reason so few credit unions offer this service is simple. The cost of establishing proprietary programs is prohibitive unless supported by large volumes of transactions. Further, expertise is essential to succeed in the ever-changing world of currency markets, and thus providing such services falls outside the core competencies of most credit unions.
As the need for these international services grows, so does the likelihood that members don’t think of their credit unions as the place to go to acquire these services. And that is the first step in losing a member. Competitors, usually large national and regional banks who tend to provide international payment services may soon see if there are other services they can offer your once loyal members.
But international payments are not as straightforward as they once might have appeared. The evolving array of service providers, and payment options, platforms and features are now available for all types of financial institutions, even the smallest of credit unions.
Credit unions can now offer a comprehensive range of international payment and foreign exchange services while assuming no risk, creating a new revenue stream, and providing members with an expanded level of service. Credit unions have the ability to access a world of opportunity by offering members international services.
With demand for international payment services growing, so is the number of providers offering these payment products. So what do credit unions need to know when looking for a provider global payment services?
The three most common types of international payment providers to credit unions, include major banks, correspondent banks and nonbank providers.
Today, all major banks offer correspondent banking services with global payments as a service, most independently and through maintaining bank accounts abroad if they have a majority of payments going to a few particular countries on a regular basis with other financial institutions. That’s good news for companies that want the convenience of bundling their international payments with their other business accounts. But not all banks’ international payment offerings are made equal. So ask about the bank’s payment platforms, options and features as well as its upfront and hidden fees, processing times, and error rates, which can be as high as 30% at some institutions.
Most corporate credit unions provide global payments themselves thanks to seamless partnerships with other financial institutions and nonbank providers. They provide an economic of scale approach to credit unions in the geographic region they service and international payments is just one of many correspondent services the corporate credit union provides to its downstream credit unions.
The third category encompasses all nonbank international payment providers. These companies are often specialists in the global payment arena, and some even offer a one-stop shop for both domestic and international payments.
When you’re screening an international payments provider, here are a few other key points to discuss.
How long have you been processing international payments?
How many globally payments do you process a year? What’s a ballpark dollar value on that?
Can you provide any references from satisfied financial institutions?
Are there parts of the globe you cannot process payments to? If so, which countries?
How do you prevent transaction errors?
If I work with your institution, who will be my point person?
So remember, even the smallest of businesses today can break out onto the international stage, we’re seeing more payment options than ever before. Some of the more popular payment types include wires, drafts and ACH formats, including low value ACH, which has quickly gained ground as an option of choice thanks to its lower fees yet still relatively quick turnaround time. All payment types will get your money to the recipient. Some just do it more quickly–even within a day’s time–than others or with different fee structures. You may use all of these payment types at one time or another. It depends on the situation, so it’s best to seek the advice of your payments provider.
Making a global payment doesn’t have to be an intimidating or time consuming process. It’s about finding the right strategic partner for your business, not just an institution to process transactions.
Bob Dowd is senior vice president, payment solutions at Cambridge Mercantile Group.
Contact 202-350-8075 or bdowd @cambridgefx.com