As companies centralise their operations and at the same time increase their global coverage, paying business suppliers around the world becomes a huge overhead. Each supplier has different needs, some want to be paid in local currency via the local ACH while others want to be paid via wire transfer, and at the same time the payer needs to comply with local and international tax arrangements. Add to this the difficulties of complying with anti-money laundering regulations around the world. Global mass payments can be a nightmare.
Tipalti was set up in 2010 to solve this problem for a large e-commerce company that had 1,000s of suppliers around the world. They now provide global mass payment services for some 100 companies with 300,000 payees/suppliers in 120 countries, processing over $1.3 billion payments annually.
Tipalti service components
Tipalit has three components (see figure below):
- payee module which resides in the paper’s payer’s web-site to take and manage the payees’ contact, payment and tax details
- payer module which provides a comprehensive dashboard giving details of the payment instructions received, those approved, remittance and reconciliation data
- Tipalti database and payment engine which maintains the transaction data and executes payment to the various banking systems it connects to.
Tipalti payment automation flows
Source & Copyright©2015 - Tipalti, Inc.
When Tipalti user takes on a new supplier/payee, they are asked:
- how they would like to be paid in their local country (Tipalti gives an estimate of cost)
- the local payment details, e.g. sort code & account in UK, Tax ID and telephone number in China, etc.
- the currency required
- the payee’s local and international tax details, e.g. VAT, social security, EIN, etc.
Each payee is given a unique ID, and Tipalti also checks whether the payee complies with anti-money laundering regulations.
Tipalti believe that one of its key differentiators is their Global Payment Engine which uses five main banking groups and third party payment providers to make their payments. Thise payment engine enables Tipalti tocan make make payments to all allowable countries world-wide. Creating such an international payment system is no simple feat; their engine has well over 20,000 rules to ensure all the right payment method and currency data is collected across the world. At present, Tipalti makes payments to payees/suppliers in 120 countries with an average ticket value of $3,000, most of which are by wire.
To make payments to their suppliers, the Tipalti user/the payee payer submits a file of payments to be made just giving the payee ID and the payer amount (the system already knows the currency preference of the payee)and what currency to be used for the payment. The FX conversion is carried out by the bank or 3rd a thirdd party.
Tipalti checks each payment for compliance with anti-money laundering regulations, as the payee may have become one since they first registered. Also they don’t make any payments unless the payee’s tax details are up-to-date. (See details of new service in Europe, here.) If the payee’s details are out-of-date they are automatically sent an e-mail detailing exactly what is required by Tipalti (who hold these tax details and forms) for them to receive the payment. Not surprisingly, most payees send the required tax details very quickly. Finally, the system also checks that all payment processing information that the payee required is accurate and uses algorithms to check character count, format, etc to reduce payment remittance issues.
Tipalti makes a charge per transaction and they pass on the bank provider’s charge(+ a markup). It is the payer’s choice, whether to accept this charge or to pass it on to the payee. Most payers pass on all the charges onto their suppliers.
Tipalti only acceptonly works in B2B environments. For the last 4 years, they have focussedfocused on internet and e-commerce companies or what it calls “network economy” companies, such as advertising and affiliate networks, crowdsourcing providers, online marketplaces, and content monetization providers, who have large volumes of payments in many different countries world-wide to help them overcome the payment processing problems, the regulatory compliance and tax issues, ensure there is no fraud and provide the many different reports that are required.
The Tipalti platform is structured in a way that should provide value to accounts payables departments that make high volumes of supplier payments, so we look forward to seeing possible developments in the future.
CTMfile take: Tipalti’s mass payment service really is a value added payment service providing not just local payments in many different countries, which is complicated enough, but also support for all the tax and regulatory issues, fraud prevention, and the required reporting internally and externally. Business process automation is what payments services are about, not just payments. This should be the model for all future payment services.
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