How to select the right PSPs for your business
In our previous article - “Avoiding payments operational complexity with fewer vendors” - we looked at the consequences of working with too many PSPs. We explained the benefits of:
- having a ‘clean’ approach to your payment operations
- how having a strategic alignment with a vendor is crucial
- why platform customizations, made more possible when you work more closely with a PSP, should be viewed as a competitive advantage
In this follow-up piece we’re going to dig deeper into each of those points, to suggest how to select which PSPs make the cut.
Big is beautiful
Size isn't everything. But it does count. If you’re going to partner with just a few PSPs, they need to collectively have the breadth of services to ensure you’re not left with any gaps. That’s the easy part. Harder to judge is whether they’ll be able to keep you at the cutting edge of payments operations in the future. Here, you’ll want to see their product roadmap; how comprehensive and ambitious is it? A look at their acquisitional history could point to a reassuring record of regularly buying in best-in-class solutions; but do they then go on to integrate those into their suite?
As mentioned, international coverage is another area to be interrogated. Payments systems don’t always scale like other software. There are too many differences in compliance and regulations between territories to simply press a button and activate a platform for a new market. A PSP that is already established in a country you are looking to enter gives you a valuable shortcut.
Ultimately, all these factors feed into a PSP’s Total Economic Impact (TEI) - a deep view of the overall financial benefit of using their platform, taking into account the greater levels of innovation, integration and scalability (to name just three) you can expect, coupled with more standard payment outcomes such as conversion and success. A credible PSP should be able to give you their TEI data. At the very least you should ask for it.
A shared plan
Different PSPs have different strengths. Just because they’ve done well for one business doesn’t mean they’re right for you. So your search must start with your strategy. It should be holistic, long-term, and clearly defined.
For example, is your priority security, or reducing friction in the payments experience? If speed to new markets is important, which ones and do you know how people there prefer to pay? If you’re running a subscription business, tackling passive churn will no doubt be a top priority. If you work with ultra-tight margins, then speed of payment and cash-flow may be more crucial. Perhaps your data is telling you to double down on a specific payment scheme, or do you want to maximize customer choice?
Without a clear set of priorities to anchor to, you run the risk that a PSP will overly-influence your payments operation strategy, and take you in a direction that is out of sync with the needs of your business.
But knowing your plan goes beyond the purely strategic. An often overlooked criteria of selecting a PSP is the cultural fit. In abstract terms, this is about being clear where payment operations sit in your organization - finance, compliance, growth marketing, customer success? More practically, it’s about making sure the personal chemistry is right. If your PSP is very technically minded, will they work well with a more creative driven Payment Systems Operator? Equally, if your payments operation has a more regulatory focus, how engaged will they be with adopting new AI and machine learning that a PSP brings to the table?
Learn more: What is payment escrow?
Lead, and be led
Size matters, as we have already seen. If you’re responsible for a decent chunk of your PSP’s revenue, customizations are likely to be in easier reach. But not always. Sometimes the cost/benefit is too prohibitive, even to please the most valuable customer. Other times the codebase might be the issue - too rigid to adapt.
Because you don’t go into vendor negotiations always knowing exactly what you might need in the future, it can be hard to get a decent gauge on this question of customizability. But some things will give you confidence. For example, do they have a customer product development group or a customer beta test program? Both will point to the level of engagement you’re looking for. Or would they be willing to contractually commit to a number of customizations per year?
But customizations don’t have to be customer-driven. Indeed, businesses may not have the appetite or knowledge to know what they really need or what is possible. This is when the really valuable PSP comes into its own. When they are so attuned to your business that they’re the ones bringing customization ideas to you. This goes beyond pleasing their big money fish. In fact, size really doesn’t come into this. It’s about empathy. A PSP missing that crucial element should get marked down every time.
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