San Mateo startup Tipalti, a firm that automates accounts payable and payments cash flow, has partnered on two recent global payment method studies. Those studies, according to Rob Israch, Tipalti CMO, have unearthed some encouraging and surprising findings for the company’s mission.
The first, conducted by Gatepoint Research, examined the supply chain. It found 68 percent of finance organizations consider their supplier relationships and retention of long-term suppliers to be of vital importance.
The finding underscores why it’s so important to facilitate a positive payments experience between the organization and its suppliers, Israch explained, as a negative experience can drive suppliers away.
Israch was surprised to learn that nearly one-third of companies (32 percent) are still not screening payees for anti-money laundering, drug trafficking, terrorism, the Office of Foreign Assets Control (OFAC) and other red flags. Another 24 percent said they “weren’t sure” if they were screening, which means they’re probably not.
These screenings are legally mandated, but Israch said many organizations don’t realize it. They think that screening the payee once during the onboarding process is good enough, when, in fact, it should be done at every transaction.
The consequences can be severe. Israch has seen organizations have their banks shut off due to an OFAC hit. If something goes wrong, the organization could be held criminally liable and its CFO could go to jail. These checks are important for domestic commerce, but become exponentially more so when business goes across borders, he said.
Tipalti conducted the second study itself, looking at trends and patterns across the $4 billion in transactions going through its system each year. The study found that wire transfers, PayPal and global ACH were the three most-used methods for international remittances.
PayPal was popular for supplier payments under $1,000 — especially for suppliers outside of the U.S., although some would not accept this payment method at all due to local regulations or the platform’s incompatibility with their bank.
Wire transfers were most popular for overseas payments exceeding $1,000 because they can be received the same day they’re sent. The fees are high, but Israch said many are willing to overlook the fees for larger payments.
Global ACH is a great hybrid because it’s fast, secure and inexpensive to send, he explained. Payments are received within two days and are protected by robust fraud controls, more so than PayPal and wire transfers.
However, many are just discovering that this option is available, according to Israch. There is still some education to be done in this arena.