Cash & Liquidity Management
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Reducing Risk, Maximising Success in Critical International Payments

Reducing risk, maximising success in critical international payments

Message in a Bottle?

by Wim Grosemans, Head of Product Management International Payments – Cash Management, BNP Paribas

There are many anecdotal stories about bottles washing up on coastlines around the world containing long-lost messages and valuable treasures years after they were sent. Presumably, the person who dropped the bottle in the first place had no expectation that it would reach a particular destination and when. But are treasurers paying any more attention when making their business-critical, time-sensitive international payments?

Diverse regulations and payments infrastructure

When making a payment, every treasurer expects the beneficiary will receive the right amount on the correct value date. Indeed, this is generally relatively straightforward in the case for domestic payments or cross-border payments between liberal economies with a comparable payments infrastructure. The challenge comes, however, when making payments in currencies or markets where regulations are more restrictive or the local clearing infrastructure is less automated. In these situations, the risk of payment failure is high unless the processing bank brings specific local and cross-border expertise, responsive customer service and robust, secure processing capabilities.

The impact of geographic expansion

As companies of all sizes continue to expand their geographic footprint and engage in more complex activities in challenging markets, the scale and complexity of their international payment requirements is increasing. Acquisitions of Asian companies by European and North American multinational corporations, and vice versa, FX transactions in more exotic currency pairs and growing trade corridors between regions such as Asia and Africa, China and the Middle East, and Europe (such as Germany) and Turkey are all creating new trade and investment flows. In many instances, the difference between the financial infrastructure, regulatory environment and payments culture of the origin and destination countries may be substantial. The challenge for corporate treasurers and their banks is how to navigate complex cross-border payments requiring specific formatting, processing and controls whilst maintaining a high level of straight-through processing to avoid error or delay and maintain competitive pricing.