Cutting costs is a constant business objective. Unfortunately, sending business payments often invites unnecessary costs. So how do you balance your payment commitments with your balance sheet? Begin by finding the places in the payments process where you could save on costs in the near-term and, ideally, gain revenue.
Automate and bulk your payments
One major point of cost savings lies in automation. Time is money, so even if you are implementing a semi-manual process to send and receive payments, you could immediately reduce operational costs by using APIs to automate your payments process.
Automation also allows you to bulk payments, simplifying what can otherwise be a complicated and manual operational process. Not only does bulking allow you to save in the obvious way (reducing the fees you pay by bundling payments), but when equipped with the right level of data from an automated platform, it can also allow you to make money.
Let’s say you’re an FX broker offering currency conversion and payments to customers around the world. By focusing on your payment data, you can get closer to where your payments are being sent, which countries have the highest volume, as well as the value of the transactions. This would enable you to negotiate for better terms from your provider. Additionally data granularity can give you greater control of your cost base, allowing you to adjust what you charge customers, so you can make money off the FX spread and payment fees. We’ll touch on that more in the section below.
Send by local ACH
When you’re sending money internationally, you can use comparatively expensive wire transfers, or, if the payment is not time-sensitive, you could use the cheaper ACH option. Given the ability to choose whether to send payments via wire or ACH, you can easily find savings as you make international payments by sending wires only when your payments are exclusively time-bound. (It’s important to note that ACH isn’t necessarily a “slow” choice. Though it can happen same-day, it isn’t often that an ACH payment is as “instant” as a wire.)
Let’s imagine your business is a financial institution providing cross-border payments to your customers. Today, you achieve this on the back of a larger bank. You pay $10 for a wire transfer and charge your customers a $15 fee to cover the cost. When you can make this same international payment via local routes, for a fraction of the price of a wire transfer, your cost decreases. Let’s say it decreases to a single dollar. Now, you can charge your customers just $5, increasing your profit significantly and providing your customers with savings, as well.
Shine a light on FX
It seems a bit self-evident, but FX costs can be money pits. While banks may offer you transparent payment fees, they can still make a profit from the exchange rates, skimming off the payment in a way you aren’t aware of. In this case, as in so many others, knowledge is power. Segregating components of your payments is a practical step to saving, as you can check your rates to ensure fluctuations in exchange rates doesn’t translate to greater spend. (What ends up in your recipient’s account? What stays with the bank? Knowing is the key to eventually choosing a better provider.)
With a payments platform or APIs that offer visibility, you can receive information about real-time rates and compare your rates to the benchmark to make better selections for FX.
Implementing business payments savings
If your company wants to save (and even make) money on business payments, there are multiple ways you can approach the goal. But to truly make the savings worth your while, it’s best to evaluate what it would take and cost to implement with a new provider. While implementing a third-party platform can be operationally simple, the value goes beyond ease — and beyond operational cost savings. Indeed, implementing an API that can help you achieve payments savings is a time-to-market and technology cost play. When you attempt to set up these mechanisms on your own, it can take years — years in which you see no benefits on the cost side at all. But when you pull in an API? The benefits are clear and immediate.
