Failed payments cost the global economy $118.5 billion in fees, labor, and lost business in 2020, a study from Accuity shows. That breaks down to $41.1 billion in EMEA, $33.7 billion in the Americas and $43.7 billion in Asia-Pacific (APAC). The average bank spent $360,000 on failed payments while the average corporate firm dropped a bit more than $200,000.
Failed payments are defined as those rejected by either a beneficiary or intermediary bank in the payment flow. Failure can occur due to inaccurate or incomplete information, data entry issues due to human error, or poor reference data and validation tools.
Those failed payments take a toll, as 80 percent of organizations with more than 20,000 failed payments per day said they lost customers from it. Customer service is affected, with 37 percent of organizations reporting a severe impact and nearly half indicating some impact.
While less than half of respondents said they were actively trying to reduce the rate of failed payments, more should put in the time, as a failed payments rate of five percent or above was what compelled 80 percent of organizations to act.
Increased automation can reduce the failure rate. Account number issues and inaccurate beneficiary details each accounted for one-third of the mistakes. While 60 percent of respondents said reducing manual processes was hard, the benefit of fewer failures seems to be worth the effort.
“From our research, we found that while organizations are well aware there is a cost to failed payments, most do not fully understand the impact both financially and from a customer retention standpoint,” Accuity global head of KYC and payment products management Dalbir Sahota said. “Tangible costs such as fees and labor might be easier to measure, but the intangible – including customer relationships – can be more difficult to repair. The payments market is fiercely competitive, so it is vital for organizations to take greater measures to improve their payments data to reduce their failed payment rate.”