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Straight-through processing banking

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The GoCardless content team comprises a group of subject-matter experts in multiple fields from across GoCardless. The authors and reviewers work in the sales, marketing, legal, and finance departments. All have in-depth knowledge and experience in various aspects of payment scheme technology and the operating rules applicable to each. The team holds expertise in the well-established payment schemes such as UK Direct Debit, the European SEPA scheme, and the US ACH scheme, as well as in schemes operating in Scandinavia, Australia, and New Zealand. See full bio

Last editedAug 20222 min read

Straight-through processing (STP) is an electronic financial transaction system used as an alternative to the traditional paper-based and manual entry system. STP uses automation to speed up processing tasks to reduce the time a transaction takes.

Before STP became a popular modern method for making financial transactions, it would take hours and sometimes days to process a transaction. Now it takes mere minutes thanks to the streamlined and automated methods used by STP.

Here is our guide to STP banking, including its benefits to businesses and what kind of businesses should use it to conduct their financial operations.

How STP works

STP empowers businesses to quickly and easily complete their financial transactions. It achieves this by automatically streamlining data sharing across multiple points, eliminating the need for human parties on both ends of the transaction to manually enter all the necessary data to complete the transaction.

A human must still initiate the transaction, but once it has been initiated, all subsequent activities associated with the payment processing are completely automated.

STP vs traditional banking

Let’s compare the simplicity of automating every part of the process once the transaction has been initiated to the old way of conducting transactions.

Before STP banking, a payment had to be initiated via the phone or a software program, with the payment details manually entered by a human. Those details then needed to be checked and confirmed, and the payment signed off by a supervisor at the payer end as well as another supervisor at the payee end. The payment transaction then happened via the sending of a telegraphic message using a special code. We can simplify the roles required in traditional banking transactions as follows:

payment initiator
payer data entry clerk
payer data supervisor
payee data supervisor
payment processor

Only the first role is required for STP, which obviously helps speed up the transaction compared to the multi-step and paper-based traditional method.

While simpler transactions conducted in the traditional way may take only a few hours, more complex payments could take several days. That makes it easy to see why so many modern businesses have adopted STP to manage both payments and receivables.

Business benefits of STP banking

The reduction in the time it takes to process a transaction is obviously one of the main benefits of using straight-through processing for business. Another massive benefit of the automated functionality of STP is that it handles all the repetitive and menial tasks required to collect and reconcile payments.

STP also minimises the potential for errors and bias inherent in manual entry tasks carried out by humans.

STP is valuable in business because it frees up the time of employees in the accounts department, allowing them to focus on higher-value tasks.

It is also especially advantageous for any business which conducts a large number of transactions. It simplifies and automates the task of tracking the spending and collection of money, helping to improve cash flow efficiency.

Which businesses should use STP?

All large businesses use STP these days as they are usually the ones conducting high volumes of transactions every day. However, practically any business can benefit from replacing paper-based accounts payable and receivable with digital and remote-friendly systems.

Many smaller businesses prefer to continue using the paper-based transaction system due to the cost of implementing their own STP system and the need to adhere to compliance obligations.

However, even such businesses can benefit from STP by partnering with a third-party provider. A payment service provider can be used for bank transfers and direct debits, allowing even a small business on a budget to streamline its finances.

We can help

GoCardless is a global payments solution that helps you automate payment collection, cutting down on the amount of financial admin your team needs to deal with. Find out how GoCardless can help you with one-off or recurring payments.