Every third international payment is delayed or blocked - not because of a lack of funds, but because of a lack of data. This is often due to security concerns on the part of the executing banks. For example, if companies cannot be clearly verified and there is therefore a suspicion of money laundering, payments are initially stopped. How are SMEs supposed to survive in global competition if even simple cash flows come to a standstill? The answer: foresight. Those who have their company verified at an early stage can participate in international payment transactions without any problems. This article shows how this also works across borders.
No trustworthy company, no transactions
In 2021, the nominal value of global goods exports totalled USD 22.3 trillion. This corresponds to an average of around USD 61 billion per day. This sum covers a wide range of transactions, from large trade deals to smaller deliveries. These dimensions make it clear that the world is economically interconnected and everything has to run precisely like clockwork. If just one cogwheel falters, for example if transactions are not recorded, entire supply chains can be delayed.
The enormous international relationships not only have advantages, but also disadvantages. There is often a lack of transparency and serious tracking. In order to avoid supporting money laundering or financing illegal transactions, compliance requirements are increasing, especially for banks. Cross-border payments often fail due to a lack of clear identification. The introduction of a standardised identifier is intended to remedy this situation. This will enable corporations, investment funds, banks and insurance companies as well as foundations and public institutions to protect themselves.
LEI registration: It's that easy
It doesn't take much effort for a company to be uniquely verified. Everything is almost effortless via a central platform such as https://lei.net. Firstly, the company's registered office is selected, then the required service (such as ‘Apply for LEI’ or ‘Renew LEI’). This is followed by the registration period, for example 1, 3 or 5 years.
Once all company data has been successfully entered, an identity check is carried out. The platform verifies the information via public registers (e.g. company register, commercial register, Global Legal Entity Identifier Foundation). Manual document submission is not necessary if the automatic data synchronisation works.
Experience has shown that the LEI is issued within one to 24 hours, conveniently as information by e-mail. The advantage: it can be viewed publicly and globally immediately, meaning that transactions or contractual relationships with international partners can also be realised at short notice. Companies also do not have to worry about renewals thanks to platforms such as https://www.lei.net/in/. On request, there is a reminder for extension/renewal.
More transparency creates an advantage in terms of trust
As well as being necessary for transactions, the additional transparency also has competitive advantages. Companies with an LEI are generally regarded as more reliable and compliant with regulations, which creates trust, especially in international competition.
When it comes to ethical and reputable business, for example, which is part of a company's own corporate values, this is particularly important. Let's say a wholesaler of catering supplies wants to work with a coffee exporter from Colombia. The wholesaler, in turn, advocates the sustainable standard of only working with reputable partners in its marketing. If both companies are verified for transparency with the LEIs, there is an unbroken, verified chain. This creates trust, not only in the business relationship, but ultimately also with the end consumer.
Automation for greater efficiency
International supply and trade relationships are also about automation. For example, companies cannot check every transaction or delivery note manually. Instead, they integrate automated processes, for example for payments after confirmed delivery or similar. This requires clean data.
What does this look like in practice? For example, a Canadian company wants to establish a new supply relationship with a logistics service provider from Kenya. The company's ERP software does not have a reliable identifier and therefore reaches its limits. As a result, automated processing of invoices, contracts or orders is not possible. Instead, employees have to intervene manually, for example to check duplicates and verify data. This costs a lot of time and labour. There is also another drawback: the susceptibility to human error. Errors can also occur during the verification or checking of data by employees, which can later appear in the wrong data record and potentially cause further delays.
If companies integrate LEI verification here, they can automatically tap into standardised data sources such as GLEIF and check the identity. This not only reduces the susceptibility to errors caused by human intervention. No, it also speeds up business processes.
