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Understanding Straight-Through Processing (STP) and Benefits


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Home / Payments Hub / Straight Through Processing
Dec 24, 2019

The lifecycle of a financial transaction has been redefined by the digital environment. What once may have taken days, can be automated and processed in minutes. Financial services have evolved and restructured the financial market in many ways. One of these avenues is through automated electronic payment known as straight through processing.

What is Straight Through Processing (STP)?

Straight through processing (STP) is an automated process that is completely done through electronic transfers and does not include any manual labor. Straight through processing is used by financial institutions to quicken payment processing without compromising security.

Benefits of STP

A credit card transaction is a traditional form of payment and often involves the interaction of many departments. The processing cycles, both on the paying and receiving end, can take days to complete. Thus, there are a variety of benefits to sending transactions the “straight through” way.

Automation and Electronic Payment

Straight through processing enables a business to automate back-office functions. That means faster processing with less human intervention. A company can avoid key steps in the traditional method that may include:

  • Phone or fax verification
  • Keying wire transfer details in the settlement process
  • Checks and balances that involve a supervisor for payment release
  • Any manual intervention required for data input and management

Transaction processing is in real-time. The automation uses a rule-based system that allows a brand to continuously monitor the exchange.

Streamline Business Processes

Traditional payment processing was initiated via the phone or through software that lacked STP capability. The payment settlement data would need to be confirmed on both the sending and receiving end by an accounting employee. The information would then require manual input into the system. Accuracy is confirmed by a supervisor prior to payment being released. This method can take anywhere from a few hours to days at a time.

STP facilitates the entire receivable process for companies. This includes both the accounts receivable and payable departments. It helps to eliminate manual processes while accelerating the exchange of money with consumers. Automation through proper accounting software will reduce the number of errors and operational risk. It enables a company to save on overhead costs and efficiently manage cash flow. STP simplifies payment instructions for all parties and lets intelligent technology carry the burden.

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International Payment Processing

Payments that are sent internationally to emerging economies must follow strict regulations and guidelines. Transactions often require supporting documents that meet regulatory laws before a wire transfer can be completed. This means several parties are involved on both ends of the payment—as well as staff from any third-party banks. The more people involved the more labor-intensive the process becomes. This leads to delays, increased costs, and a higher risk of keying error. Delayed payments also don’t bode well for branding and online reputation management (ORM).

STP has increased the speed and efficiency of global payments. Instructions on payment and routing information do not need to be entered manually each time. This saves an incredible amount of time. Especially when dealing with the same international customers and banks.

Authentication and eCommerce

The authentication process can slow down an online transaction. STP enables a company to easily authenticate a customer within a few clicks. This includes the entire procedure, from selling the product to initiating payment and setting delivery. Automatic authentication leaves less room for human error and fraud.

A quick authentication strategy can also enhance sales efforts. Additional products and services can be offered to a customer through automated suggestive selling. It’s business intelligence with one point of sale. Profits are increased by reducing labor costs and errors while initiating continuous cross-selling practices.

The Brand Experience

In addition to helping a company scale and grow, STP increases customer satisfaction. It creates a positive user experience through convenience. When you shorten the length of the transaction processes, customers are more eager to do business. An organization can spend more time collaborating, and less time collecting. Brand trust leads to brand loyalty and repeat business.

Straight through processing also helps to engage employees and facilitate daily operations. A strong STP infrastructure allows employees to locate data faster, answer customer questions quicker, and create a more personalized consumer experience. It enables a brand to focus more on growth and less on menial labor.

Improving STP

Smaller companies may find STP prohibitive due to the system integrations required. As a result, larger organizations stand to benefit the most from this financial process. That’s because they have larger economies to scale. However, technology improves daily. New accounting software is being developed that focuses on facilitating operations for smaller businesses.

To ensure you take full advantage of STP, it’s important to maintain control over preparation and automation. Payments that are pre-validated are more likely to reach their destination. Prepare by checking simple things like the format of bank account data and the existence of bank codes. Also, determine if the payee is the intended recipient. This will help to avoid the need for costly fixes in your STP system.

Automating the payment submission process will further streamline straight through processing. Not only does it remove errors, but it also reduces fraud and improves security. Automation allows for the separation of good transactions from faulty ones. This ensures peak performance by processing correct payments as quickly as possible while segregating ones that need attention. It’s a more focused and refined operation.

Key Takeaways

The traditional method of payment processing is costly, requires a lot of labor, and is inefficient for today’s global market. STP reduces complexity and saves money for an organization of any size. A well-conceived strategy can completely automate your receivables department. It allows for the whole system, from initiation to settlement, to be handled through technology.

Financial business intelligence like straight through processing will never replace a human organization. It’s simply a tool to handle routine labor. This allows people to focus on more innovative tasks that spur creative growth.

About the Author

Brianna Blaney

Brianna Blaney began her career in Boston as a fintech writer for a major corporation. She later progressed to digital media marketing with various finance platforms in San Francisco.
She prides herself on reverse-engineering the logistics of successful content management strategies and implementing techniques that are centered around people (not campaigns).
In her spare time, she’s a self-proclaimed chef, lives in the middle of the woods, and has a frequent flyer card for birdseed and dog bones.


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