Why you should track payments in real time as a fintech company

Matthieu Blandineau
January 2024
min read

Payments are how most fintech companies deliver value to their customers – and often are their core product. Making sure all payments are successfully executed is therefore critical for fintech companies.

To ensure maximum payment success rate, fintech companies must determine if, when, and why some payments fail. This is one reason why payment tracking is key for fintech companies, but there are others.

In this article, we unpack why fintech companies should track their payments in real time.

What is payment tracking?

Before we explore why fintech companies should track payments, let’s define what payment tracking is.

Payment tracking consists of obtaining information about the lifecycle of payment, from its initiation to its final execution — or to the step at which it fails.

For instant payments, you know if a payment succeeded or failed within a few seconds. However, the complete execution of non-instant payments can take up to 2 to 3 business days.

A payment usually goes through the following steps:

InitiationThe payment originator orders its fintech to send a payment to a counterparty.
Internal processingThe payment is going through the internal workflow of the fintech. This workflow can include internal approvals, AML-CFT checks, and batching of individual payments.
SentThe payment is sent to the fintech's partner bank.
ExecutedThe payment is executed by the fintech’s partner bank.
ReconciledThe payment is reconciled with a corresponding transaction on the fintech account held at the partner bank. It confirms that everything went well and that the receiving bank effectively received the payment. It’s usually concurrent with the moment the funds corresponding to the payment are made available on the beneficiary's account.

The payment is reconciled with a corresponding transaction on the fintech account held at the partner bank. It confirms that everything went well and that the receiving bank effectively received the payment. It’s usually concurrent with the moment the funds corresponding to the payment are made available on the beneficiary's account.

That’s, of course, the happy flow of a payment when every step goes well.

However, a payment can fail at any of these steps for various reasons. Common payment failures include:

Payment failureDescription
RejectionThe payment is rejected, in most cases by the sending bank. It can happen for multiple reasons:
1. The payment lacks mandatory data or contains incorrect data, such as an incorrect account number.
2. The payment breaks the send bank’s rules, such as insufficient account balance.
3. The payment did not pass AML-CFT checks.
ReturnThe payment reached the beneficiary bank, but the beneficiary bank did not accept and returned the payment. Return reasons include:
1. The beneficiary account of the payment is closed, blocked, or does not exist.
2. The beneficiary account does not accept payments (e.g. it is a savings account).
3. The beneficiary bank detected that the payment was a duplicate payment.
4. The payment did not pass AML-CFT checks.
UnreconciledNo transaction on the account of the sending fintech held at the partner bank can be matched with the payment.

Given all the steps a payment can fail at, it is essential for finance, operations and support teams to know:

  • If a payment has been successfully executed

  • If the payment is not a real-time payment, the step the payment failed at

  • If the payment has failed: know that it has failed, the step, and the reason

Why is payment tracking important?

Overall, payment tracking enables fintech companies to make sure that payments are properly executed, and quickly identify and solve any issue. And various stakeholders can be very interested in whether money moves according to the plan or not.

Customers want complete visibility over their payments

Whether obtaining a loan, paying an employee salary, or collecting a payment from a buyer through your services, payments are critical to your customers. Therefore, they require certainty on the success of their payments and as much visibility as possible on their payments if they are not real-time.

If you do not proactively share updates on payments made through your product, customers will solicit your customer support team. If customers find out that a payment has failed only after contacting your support team, they will lose trust in your product.

Tracking payments in real-time and sharing this information with your customers will decrease support tickets and increase customer trust. It also enables you to understand the exact reason why a payment failed and automatically retry failed payments as soon as possible or ask your customer for more or correct information if the payment failed for that reason.

Increase productivity of customer support teams

As mentioned previously, tracking payments and sharing status updates with your customers will decrease related customer support tickets. However, unexpected issues will still happen and some customers might open customer support tickets despite this transparency.

Without proper, automated tracking of payments, customer support teams have to dive deep into various data sources, including internal systems, bank account statements, and payment status reports, to understand the issue. Most of the time, they won’t have direct access to this data, leading to long, painful and expensive back-and-forths between your customer support, engineering, and finance teams as well as partner banks.

When they obtain the correct set of records, they will have to manually explore various files containing information about often hundreds or thousands of payments and track potential errors back to the initial payment for which the issue has been raised.

This leads to very long support ticket resolution time when, again, customers expect real-time visibility on a service as critical as payments. In addition to eroding customer trust, it represents a massive loss of time for your support teams.

Enable payment operations teams to resolve incidents faster and prevent them

Payment operations teams are in charge of making sure all payments are executed smoothly. They are among the teams customer support agents will go to when a payment status-related ticket is opened, so automating payment tracking and enabling customer support teams to access this data autonomously will save payment operations teams much time.

Real-time payment tracking also enables the payment operations team to receive alerts whenever a payment fails, investigate why, and take immediate action to prevent further payments from failing. For instance, if they identify that a partner bank's systems are unavailable, they can decide to momentarily reroute payments to another partner bank.

Adequate payment tracking also enables payment operations teams to ensure that their entire payment stack operates as expected without having to run complex data analysis and identify and fix recurring issues. For instance, if multiple payments fail because of incorrect address format or beneficiary IBAN, payment operations teams can work with product teams to enforce the verification of these payment information when filled out by customers before initiating the payment.

Optimise liquidity management

More accurate and real-time payment tracking enables fintech companies to know the funds that will be credited or debited from their accounts before receiving end-of-day account statements.

They can, therefore, manage the balances on their different bank accounts more precisely for instance, by hour instead of day, and operate with smaller margins.

It frees precious liquidity for fintech companies, enabling them to, for instance, move funds from their settlement account to their interest-bearing safeguarding account faster or make more cash available to extend loans as soon as instalment payments are confirmed for credit companies.

How to track payments in real-time

The complexity of accessing, manipulating, and reconciling payment data makes it challenging to track payments in real time, even for the most sophisticated fintech companies and the most advanced payment operations teams.

There are many dimensions to consider when choosing or building your payment tracking solution.

If you would like to learn more about how Numeral supports fintechs in tracking their payments in real time, contact us.

Not sure where to start?

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