EVANSTON, Ill. -

Accuity pinpointed just how much it costs finance companies, banks and other firms involved in financial services when customer payments do not arrive as scheduled.

According to the latest study from the LexisNexis Risk Solutions company, the impact of failed payments is estimated to have cost the global economy $118.5 billion in fees, labor and lost business in 2020.

Of that amount, Accuity determined $33.7 billion stemmed in the Americas

The report showed banks spent on average approximately $360,000 in 2020 on failed payments — which includes all fees, labor and costs related to customer attrition — whereas the average corporate firm spent just over $200,000.

Accuity defined a failed payment as a payment that is rejected by a beneficiary bank or an intermediary bank in the payment flow. Report orchestrators said payments can fail for several reasons including inaccurate or incomplete information, data entry issues due to human error or poor reference data and validation tools.

Key themes that emerged from the findings include:

— Customer experience matters: 80% of organizations with more than 20,000 failed payments per day reported having lost customers as a result. Failed payments have the biggest impact on customer service, with 37% of organizations reporting a severe impact and nearly 50% indicating some impact.

— There is a tipping point: Although fewer than 50% of respondents stated they were actively trying to reduce the number of failed payments, the study found that a failed payments rate of 5% or above was the tipping point that compelled 80% of organizations to act.

— Validation processes make a difference: Account number issues were the cause of one third of failed payments and inaccurate beneficiary details were the result of another third. The survey also showed that 66% of organizations found reducing manual processes extremely challenging. Manual processes introduce human error and slow down the payment process, making it less efficient.

Dalbir Sahota, global head of KYC and payments product management at Accuity said in a news release, “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.

“Tangible costs such as fees and labor might be easier to measure, but the intangible — including customer relationships — can be more difficult to repair,” Sahota continued. “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.”

The report is based on a survey conducted earlier this year that generated responses from more than 200 payments professionals across the banking, financial, fintech and corporate sectors. The report is geared to provide an overview of the payments landscape, explores the key themes that emerged from the survey and provides insight into the various elements that had an impact on failed payments throughout 2020.

The entire report can be found via this website.