Viewpoint: Carrier Pigeons and What the Payments Industry Can Learn from FedEx
Consider the following scenario. You’re the head of payments at an on-demand company based in San Francisco—let’s call it Zuber. You’ve recently opened a new office in the U.K. and you need to send the originals of some paperwork to an overseas colleague. There’s just one problem: The contracts need to be in the hands of your British co-worker within two days. Now you have to decide whether to send the documents by standard mail and risk having them arrive late, or opt for an express service, like FedEx, to ensure fast, efficient and secure delivery.
The choice is obvious in this situation: Send the documents with FedEx. This is because using an express service ensures a handful of things (depending on which provider you choose, of course):
- Validation of the address to which you’re sending the package
- Seamless trace-and-track visibility from pickup to delivery (including import and departure scans at all depots)
- The added security of signature proof of delivery
- The ability to share shipping updates via e-mail
- The option to redirect shipments
Expedited courier services have built their reputations around dependability, security, efficiency and ease, effectively taking advantage of holes in the standard mail delivery process. Because, let’s be honest, when you toss a letter in the mailbox on the corner, who really knows what happens next? There’s no visibility into the delivery route. There’s no verification that the address you’re sending the letter to exists or insight into how long it will take for the item to arrive. For all you know, that letter is being delivered by a carrier pigeon!
Where’s My Money?
Now, let’s imagine that as the head of payments at Zuber, you’re trying to send earnings to drivers. As much as I hate to admit it, bank money transfer models—especially those built to handle high volumes of worker payments—are built a lot like traditional mail delivery systems. When you use a bank to send money, especially cross-border worker payments, it’s a lot like popping a letter in the box; the sender and the recipient have no choice but to trust that the banks involved in the transfer will execute it quickly, securely and as affordably as possible (which, if you’ve ever sent a cross-border transfer, you’ll know is definitely not the case).
Like the standard postal service, there are a lot of holes in bank money transfer systems. For starters, there’s typically no validation of the destination bank when a transfer is initiated. While you may be asked to provide a routing number (the number that’s associated with the bank branch where you want to send the money), there’s no guarantee that the bank from which you’re initiating the transfer will check to make sure you entered a valid number. Mess up one digit and you won’t know until the payment fails. Worse yet, you won’t know where your money is, when you’ll get it back or what amount will be returned to you.
It gets worse. Let’s say you want to send a worker payment from Bank A to Bank B; however, these two financial institutions don’t have an agreement with each other to enable this transfer. To successfully move your money between accounts, Bank A needs to send the funds to Bank C, which is a mutual partner of Banks A and B—but neither the sender nor the recipient is notified of this rerouting. Nor are they told about the additional time and costs associated with this detour. There’s no way to track or confirm delivery of the payment; rarely is there even an estimation of when the funds might show up. There is, quite literally, no visibility in your transfer path. For all we know, that letter-carrying pigeon could have your money strapped to its back.
Clearly there’s an issue with how banks manage cross-border money transfers and payments. The process is inefficient, costly and archaic. That being said, I can understand why it is the way it is—building a truly global platform that enables FedEx-like payment transfers is no easy feat. I know firsthand because we’ve been building this exact solution and network here at Hyperwallet.
Sending Payments the Same Way We Send Express Packages
Providing our clients with granular control over their worker payout process through trackable, verifiable cross-border payments has long been our goal at Hyperwallet. Like express mail services, our global worker payment solution makes it easy for companies like Zuber to:
- Ensure that the destination bank and account are valid using bank validation databases before sending the money.
- Fully track-and-trace payment visibility, beginning the moment the payment is uploaded into the system.
- Pinpoint the delivery date through enhanced delivery algorithms that take into account national and international bank holidays, payment network cutoffs and delivery service-level agreements.
- Provide the recipient with full control over how they receive their funds.
And, thanks to new advances in payments infrastructure, we’re getting closer to including delivery confirmation, providing the first true end-to-end payout tracking value chain. As you can imagine, there are an overwhelming number of use cases for this new technology—just think of the thousands of collaborative, on-demand and sharing-economy platforms that could benefit from integrating this granularity into their worker payment experience.
Getting Up To Speed
Let’s think back to the original problem; the one we introduced at the beginning of this article. You’re still a Zuber exec, and you still need to get those contracts to your U.K. office within two days. But wait—your co-worker calls you back. It turns out that she needs them delivered within 12 hours. Difficult though it may be, if you get the package to FedEx in a reasonable time, they can probably make that happen. But what if you needed to send payments to your U.K. drivers? Could you pay your independent workforce in that same time frame?
We’ve seen a growing demand for faster payments over the past several years. Domestically, the recent Same Day ACH ruling by NACHA will improve the speed of debit and credit transactions within the U.S., but it won’t have any impact on the speed of cross-border payments. Similarly, while Ripple promises to revolutionize international transactions with real-time clearing, netting and settlement, it remains unclear when (if ever) the protocol will achieve mainstream acceptance. What is certain, however, is that the speed of cross-border payments needs to improve. Fast, secure, simple and streamlined—sending money to your dispersed contract workforce should be as easy as sending an express package with FedEx.
Bill Crowley is chief product officer at Hyperwallet Systems Inc., where he is responsible for all aspects of innovation within Hyperwallet’s product department. Hyperwallet’s dynamic payment platform is built atop a network of end-to‐end payment rails, which allows businesses to pay their earners anywhere in the world, any time, and for any amount. Bill can be reached at email@example.com.
In Viewpoints, prepaid and emerging payment professionals share their perspectives on the industry. Paybefore endeavors to present many points of view to offer readers new insights and information. The opinions expressed in Viewpoints are not necessarily those of Paybefore.