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Liam Dempsey, assistant treasurer at Canada’s Vermilion Energy, described areas where the global company faces cross-border-payment challenges. The challenges include paying and receiving payments in multiple currencies related to its derivative hedging and notional-pooling programs and paying employees overseas.
“Ex-pat employees around the world have local accounts in local currencies, and we need to fund them with the correct amount, net various fees,” Dempsey said, as part of a panel at the AFP 2021 Annual Conference entitled Re-thinking Treasury and Payments for 2025. “So we would like to see an improvement in transparency.”
He noted the uncertainty about when payments from customers around the world will arrive, and that they often arrive in Canada late in the day. These late-day payments are often past the cutoff time to invest the funds—a lost opportunity.
As corporations push to stay competitive in a globally integrated economy, their cross-border payments still face legacy challenges that can result in delays and unexpected fees. Cross-border payment networks including SWIFT, SEPA, card networks, and Fintechs are each seeking to provide customers with greater visibility into the payment’s routing and handling, as well as certainty about sending and receiving the correct amount on schedule. Those elements are increasingly important as internet commerce continues to grow, but also as companies stretch their sales, operations, and supply chains overseas—employees and suppliers alike increasingly demand timely, accurate payments.
“The payment systems have been trying to differentiate themselves by providing more transparency, reliability, and predictability on how the payment will flow, and how much money will actually get credited to the beneficiary,” said Tim O’Donnell, managing director at Accenture.
Even before COVID, consumers had high expectations operating in a digital economy. Unfortunately, there is a gap between what consumers expect and what businesses can deliver. Rapid advances in technology, global supply chains and the rise of gig workers have accelerated ecommerce as well as consumers’ expectations of immediacy, creating friction when payments are unexpectedly delayed. A key for businesses to remain competitive in the digital economy is being able to send payments across borders with transparency and certainty.
Payment-service providers compete on payment speed, reliability, and pinpoint accuracy.
Global Commerce Fuels Need for Faster Payments
The Importance of Dissent
Susan Dominguez, director of product at Mastercard, says institutions that partner directly with established local financial institutions which provide access to the local payment clearing system is an effective way to achieve on-time and transparent payments. Those institutions are well-acquainted with the domestic rules and requirements, providing clients upfront with the pertinent rules and requirements.
“A client that partners with an organization with access to local financial institutions that has detailed knowledge about the data, documentation and registration requirements can incorporate that knowledge into its own payment platform and the payments it sends,” Dominguez said. “It’s essential to have access to a library of requirements in different markets.”
That approach is especially helpful in the more exotic markets that tend to place more rules and requirements on cross-border payments. Indeed, in those instances it is even more important to work closely with local payment-service providers who understand their markets and regulators.
“This will ensure that corporates sending payments to these markets understand the requirements and limitations,” Dominguez says, adding some markets may place limits on the purpose-of-payment or require registration or specific documentation. “Understanding requirements and any limitations upfront are key to success in these markets,” she said.
A Different Approach to Cross-Border Payments
Robyn Pollack, Managing Director at AchieveNEXT
"Diversity is going to be critical to the rebound of enterprises. Diversity of thought is what drives innovation and better problem solving and better decision-making. "
Ultimately, the goal is to connect payment recipients globally, enabling automation and a more seamless experience so payments occur faster and with fewer errors. In countries that already have instant-payment systems, a strong provider should be able to offer real-time delivery of funds, accessing those systems through its local financial-institution partners. The number of countries with real-time payment systems is continuously increasing.
“Each of those markets has its own rules that banks must abide by, such as delivery times, or no deducting funds from payments,” Dominquez says. “So payments are going over rails that have rules and are understood by the payment vendor.”
Cross-Border Payments in Real-Time
58% of middle-market companies said that they were effectively leveraging diversity and inclusion for enterprise growth and success.
The Power of Diversity
With the advent of globalization and technological advancements, the workforce has expanded beyond a nation’s borders, leveraging the global network of diverse candidates from countries around the world. As such, diversity and inclusion have become key buzzwords over the years as organizations dedicate resources to establishing and maintaining a diverse and inclusive organization.
As organizations work to implement this ethos, the social discussion surrounding diversity measures has been muddled with misconceptions on what diversity is, its importance to modern organizations, and how to foster diverse and inclusive spaces. In the FinNext 2020 Virtual Series webinar, The Power of a Diverse FP&A Team, panelists discussed these misconceptions, shared their own career experiences, and provided actionable insights towards establishing a culture and policies that support a diverse workplace.
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According to a survey by AchieveNEXT, 58% of middle-market companies said that they were effectively leveraging diversity and inclusion for enterprise growth and success, and 81% consider diversity and inclusion either somewhat critical or very critical. Yet, when looking at reality, the beginning of one’s career may seem diverse but as you progress towards the C-suite, that dynamic shifts. This gap highlights the difference between claiming to value diversity and supporting the diversification of your employees at all levels of the organization.
There is an old notion that diversity is simply about the recognition of difference, but Geetanjali Tandon, senior director of financial planning and analysis at Centralsquare, pushed back on this rhetoric, noting that simply celebrating women or a particular culture for a day doesn’t make an organization truly diverse.
Instead, Tandon offered an alternative view. “Becoming diverse is actually making sure that you have the right people, the diversity in your talent pool, in your promotion pool,” she said. “When you are looking at projects, when you're looking at the things that are bringing people forward and giving them exposure, who are the people that we are giving those projects? It’s having a conscious thought process of how we are doing that and why we are doing that.”
Tandon’s point reflects a key component to diversity, that there is a difference between representation and equity. Diversity inherently means that there are differences among individuals and these alternative perspectives are what help combat groupthink within organizations. If this benefit of diversity is to be utilized, then there must be a cultural shift within the organization to not only acknowledge the fact that there are differences, but to accept, encourage and promote constructive dissent.
Geetanjali Tandon, Senior Director of Financial Planning and Analysis, Centralsquare
"Becoming diverse is actually making sure that you have the right people, the diversity in your talent pool, in your promotion pool."
Dissent is often thought of in a negative light, as something we should work to root out or overcome. In reality, dissent simply means the expression of opinion in variance with what is previously held. The negative connotation is our social bias working against us; humans are social creatures that desire an ordered community to a certain degree, and so we naturally view dissent as a threat to that order instead of perceiving it as an opportunity to develop and grow the community.
Michael High, director of finance for U.S. Gulf of Mexico Deep Water/Royal Dutch Shell, touched on the discomfort of adopting this perspective. “I think one of the most important skills you can have as a leader is actually a growth mindset and recognizing that you don't know everything,” he said. “You can't have a fixed mindset around your understanding of diversity and inclusion; you have to recognize that actually you know a lot less than you think you do.”
Conformity cannot come above all else in today’s world. Meredith Jones, principal cloud economist at Amazon Web Services, detailed her company’s approach. “One of the things that we have at Amazon is the leadership principle that guides our behavior; it's called ‘Have Backbone, Disagree and Commit.’ Essentially, that principle illustrates how we value diversity of thought. We expect any Amazonian at any level to speak their mind, to challenge conventional wisdom. In doing so, that diversity of thought has really been foundational to innovation,” she said.
The current COVID-19 pandemic presents a stark reminder as to why organizations need constructive dissent, noted Robyn Pollack, Managing Director at AchieveNEXT: “Diversity is going to be critical to the rebound of enterprises. Diversity of thought is what drives innovation and better problem solving and better decision-making. Having those diverse opinions and thoughts and experiences in the room is what's going to drive those better decisions.”
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A key challenge is certainty. It is imperative for corporates to understand when a payment will be available to their suppliers, as well as the exact amount that a supplier will receive. Too often, there are breakages along the payment path that may require another payment to address the difference. The uncertainty and delays can cause friction in the relationship between buyer and supplier, making it difficult to secure payment discounts and receive competitive pricing.
Straight-through processing of payments offers a solution, but achieving it is challenging for enterprises. Corporates must understand all the payment requirements upfront to ensure compliance when submitting payments, thus avoiding submissions that can result in rejections or delays. However, few corporations have the expertise and resources to keep up with cross-border compliance requirements.
The managing director of treasury and trade solutions at a global bank noted that to achieve transparency into where payments are in their journeys as well as reliability and certainty of payment, necessitates addressing regulatory, operational and technology challenges. The parties facilitating payments must understand local regulations and communicate with local regulators and influencers, requiring “boots on the ground,” he said.
Having local expertise is vital operationally as well, for example, to ensure that foreign payroll payments arrive on time and in full value, since local-payment banking practices differ in every market. The banker added that payment-related technology is ever evolving, requiring diligence by all members of the payment value chain. Payment technology platforms must be able to accept and record the expected data elements, operate on the proper exchange protocols, and screen for tax and regulatory purposes. In some countries, he said, that requires connecting to six or more clearing systems, all with different API nuances, cut-off times and data elements.
“The last piece is how to make this interoperable across borders,” the banker said. “How do you knit together the regulatory, operations and technology considerations in a way that incorporates different languages, time zones, protocols and payment-systems at different stages of development.”
“Ex-pat employees around the world have local accounts in local currencies, and we need to fund them with the correct amount, net various fees.”
A lost opportunity
Uncertainty and delays can cause
Late-day payments are often past the cutoff time
friction in the buyer and supplier
address: regulatory, operational
To achieve transparency you must
and technology challenges.