Failed payments are not just an inconvenience. They cost the global economy an estimated USD 118.5 billion every year (LexisNexis). And the pain is magnified in cross-border corridors, where failure rates can reach 11% (PYMNTS).
For a mid-sized corporate processing 120,000 cross-border payments annually, even a modest 2% error rate translates into nearly half a million dollars lost each year in enquiry fees and wasted staff time. Behind every failed transaction is a painful chain reaction with days of phone calls between banks, long wait times for resolution, anxious customers unsure if funds are lost, and strained relationships when suppliers or families are left waiting.
Do you know how much it is dragging on your reputation, lost customers, and dissatisfaction? Multiply that across banks, merchants, and remittance providers worldwide, and the true economics of post-payment recovery become unsustainable.
That’s why leading financial institutions and payment service providers are beginning to ask the harder question: instead of spending millions chasing errors after the fact, what if we prevented them from happening in the first place?
The Efficiency Story: Why Fixing After the Fact Is More Expensive
Recovery is reactive, fragmented, and slow. Once a payment goes wrong, it sets off a chain of manual interventions like compliance checks, interbank communication across jurisdictions, FX reversals, and customer service escalations. Each step consumes valuable resources that could otherwise be spent on growth and innovation.
Domestic rails typically see low single-digit failure rates, but international corridors can reach up to 11% of payments failing (PYMNTS, 2024). That means the unit cost problem multiplies against higher error volumes.
Example in practice
- Corporate size: 10,000 cross-border payments per month
- Annual volume: 120,000 payments
- Failure rate: 2% → 2,400 failed payments per year
- Average resolution cost per failure: USD 200
- Annual cost of failures = USD 480,000
That’s before factoring in reputational damage, lost customer trust, emotional cost, or relationship harm from delayed supplier payments. Lexis Nexis (2021) for example, further reports that 60% of organisations report losing customers because of failed payments.
This is where the pain becomes real.
For a migrant worker remitting money to family, a single digit entered incorrectly can mean weeks of uncertainty. While banks chase the payment across borders, the worker fears the money is gone, and the family back home waits anxiously for rent, food, or school fees to be covered.
For an SME shipping goods overseas, especially in the context of SME international payments, a failed payment can delay a shipment, frustrate the buyer, and erode trust with one mistake rippling into lost contracts and missed opportunities for growth.
This urgency is only intensifying. Liabilities for fraud losses are growing. Many jurisdictions now operate formal liability and recovery mechanisms for fraud losses related to Account-to-Account payments. Furthermore, recent enhancements to FATF 16 rules seek mandatory beneficiary name matching. This can all be done pre-payment.
How Payment Failures Happen
Payment failures have many root causes. A single typo in an account number, a mismatch between payee name and account, or missing beneficiary details can cause a transfer to bounce. Intermediary bank charges or FX conversion errors can leave payments short. In cross-border corridors, inconsistent formats, and verification standards make these errors even more likely. Each failure may look minor in isolation, but together they represent a systemic drain on efficiency and trust.
Why This Problem Gets Ignored – It's Not a KPI
Recovery inefficiency often isn’t tracked or measured. Fraud losses are, revenue per customer is but the true cost of failed payments rarely makes it onto a leadership dashboard. That’s why the issue lingers in the background, even when the numbers are significant.
With costs spread across operations, compliance, and customer service, and with benefits that often show up as improved trust and retention rather than direct savings, it becomes easier to defer the investment.
As outlined, a mid-sized corporate loses USD 480K annually before reputational damage or customer churn is even considered. The real burden however falls on SMEs and retail flows, where failures are more common and just as costly in terms of time, trust, and customer relationships. These are the segments where up-front validation of beneficiary and payee accounts delivers the clearest economic benefit, helping institutions reduce payment processing costs while protecting customer trust.
Prevent Losses from Errors with Global KYP
At iPiD we know that soon, all payments will be accompanied by up-front validation. Preventing errors upfront is always less expensive and more sustainable than chasing them down after the fact. One of our clients, Wallex, has reported 25% fewer failed transfers and 34% fewer support tickets. Other clients systematically review, using iPiD software, the accuracy of their payee account information.
That’s what Global Know Your Payee (KYP) delivers: a framework that moves verification to the start of the payment process, so errors and fraud never enter the system in the first place. It is a powerful approach to payment fraud prevention that makes cross-border flows safer and more efficient.
At iPiD, prevention is powered by two complementary solutions:
- iPiD Validate, a single global API for real-time payee verification across borders. It checks whether the payee name and account details align between the intended payee and the actual payee before the payment is sent, cutting out misdirection and fraud at the source.
- iPiD Node, a one-stop shop that connects into any domestic scheme (UK CoP, EU VoP, and beyond) and provides a robust data and intelligence layer: forensics, corridor-level insights, reporting, and resiliency features that help banks and PSPs actually learn from payment flows, reduce mistaken payment costs and reduce risk system-wide. It further provides both requestor and responder capabilities.
Together, Validate and Node provide a prevention-first architecture:
- Customers gain confidence that money will arrive safely the first time.
- Banks, PSPs and corporates reduce the operational costs of payment error recovery and gain visibility into where payments fail.
The result? Payments are safer, smarter and less expensive.
Getting started: how to Prove the ROI
The case for prevention becomes real when leaders see the numbers in their own context. The simplest way to start is with a pilot:
- Run a test in limited corridors. Measure direct benefits like fewer enquiries, faster resolution times, and reduced failure rates.
- Track indirect benefits. Improved customer trust, lower attrition, and stronger reputation are harder to quantify but just as powerful.
- Translate into executive metrics. Efficiency gains, the ability to reduce payment processing costs, margin improvement, fraud reductions and compliance adherence.
References
- LexisNexis Risk Solutions – The true cost of failed payments: report reveals global economy lost $118.5 billion in 2020 (2021).
- PYMNTS – Failed cross-border payments cost U.S. merchants an estimated $3.8B (2024).
