Avoiding payments operational complexity with fewer vendors

Different payment providers bring different capabilities. But too many introduces complexity. So how do businesses find the right balance?

When it comes to optimizing payment operations, it’s rare for a business to start with the question: “What is the least number of PSPs we need?” It’s more likely they will have taken a challenge and solution-led approach. That is to say, they will have looked at a specific pain point or opportunity, and then found the vendors that have the tools they need. Even more likely, they will not have approached each new investment in a unified way. 

The appetite to keep pace with developments in the payments space has forced many businesses to take a pragmatic approach to building their payments operation stack. Less long term, holistic planning; more fix it fast and move on.

The consequence is often a payment workflow littered with PSPs providing individual point solutions. And this has become a problem. As Ayo Najah, now Head of Payments Optimization for a global news publisher, explains: “Nobody ever thinks about the fact that once you add 12 payments partners into your stack, you’ve got 12 different external portals with 12 different user credentials…and then that’s tax reporting that you have to do for 12 individuals now in 12 different portals. The internal costs are significant but rarely considered.”

Ironically, in trying to keep up with innovations, businesses are hijacking their ability to make real progress as their payments operation becomes suffocated in complexity. Too many systems to deploy and integrate, with too many commercial contracts to manage, sucking up budget and resources that could be more valuably applied elsewhere.

So perhaps it’s time for organizations to hit the pause button and subject their PSPs to the same rationalization as vendors in other parts of the business face. Here we look at some of the benefits of working with a small number of PSPs.

Clean vs cluttered

Let’s take a car. When you buy a new car, you don’t go to one place for the engine, another for the wheels, get the gear system from here, and the chassis from there, and then try and put the whole thing together. 

Yet this is how many businesses approach their payments operations. They invest in individual point solutions for specific schemes or compliance obligations. Whatever advantages you have been enticed by - be it specialist features, fast deployment or low cost - are soon extinguished when you come to stitch the solution into an already cluttered landscape. And perhaps it all becomes too much for the lone Payment Systems Operator to handle.

Let’s take a common payments operation challenge for enterprise businesses - expanding into new markets. The temptation here - as history shows - is to find a ‘local’ payment provider. But, as Logan Vander Linden, Head of Payments Partnerships and Operations at Scribd explains, that can be shortsighted. “The reality is...it's very difficult to know what infrastructure you're signing up for, or what management and maintenance you're signing up for when you go local in a particular market because you haven't done it before…”

Now compare that with a payments operation stack compromising relatively few vendors. Less solutions is likely to mean easier integration, and faster adoption of new capabilities when they become available. With a reduced number of data sources, it’ll be faster to centralize insights and reports, and trust the consistency of what you’re viewing. And with fewer connections required between different systems, there’ll be greater opportunity for automation - both during the payment process and at the data analysis stage. 

Partner vs puppet

Strategic alignment with any vendor is crucial. A shared vision is what elevates a supplier into a true business partner. 

As payment workflows become more fundamental to businesses, there’s more importance on only having the right PSPs in your team. Even a few PSPs not truly pulling in your direction has a dangerous amplification effect across a business. 

As Andrew Row, Managing Director of Uber Payments, explains, there is already significant internal complexity with an enterprise payments strategy, meaning “...that we’re going to have to review every product before it launches, and have to think about a regulatory strategy, and think about risk management in a way that we haven’t thought about before. It takes a mind-shift across every single department of the company to support.” With all that in mind, the last thing you need is a handful of PSPs subverting your strategy to their will.

Yet this happens. Let’s take a moment to think how this looks to a PSP. You’re not going to be their only client. And even if you’re their most profitable for now, there’s no guarantee that’ll last. So why should they commit to sharing your vision for payments, rather than another of their merchants? Whereas it’s unrealistic to think that any PSP will blindly march to every beat of your drum, it does follow that having too many partners needing to buy into your vision will inevitably compromise that plan. After all, PSPs are in competition with each other. Their agendas and priorities are designed to conflict. They can’t all have your best interests at heart.

Customize vs compromise

As payment operations move from being a financial process to a point of competitive advantage, the pressure is on to eek out every drop of improvement - from optimizing the payment experience, to garnering more valuable data insights. 

Customization is the name of the game. But tie yourself in with the wrong vendor, and those improvements come too late, if at all. Worse still, they aren’t what you really need. As Andrew Row, Managing Director of Uber Payments, explains: “I often think that the more third party services you use the more you are now customizing your system and your customer experience to fit that third party. So rather than developing things for yourself you're now developing for that third party.”

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Written on Sep 04, 2020 by

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The Checkout.com team