Guide to payments operations

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.

What are payments operations?

Payment operations is a term that encompasses all the systems, tools and processes that are responsible for the movement of money through your business. 

This can include transaction processing, authorization, reporting, initiating refunds or chargebacks, payment reconciliation, and bookkeeping. 

Most of these elements are now conducted through digital or automated software and APIs that are provided by specialized third-party vendors, making it easier than ever for businesses to optimize their payment operations. 

Why are payments operations important?

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.

• Lower costs - optimized payment operations are far more cost-effective for a number of reasons. Firstly, if you’re using a modular system, you only need to pay for the functionality you need. Secondly, you gain greater visibility over your payments through data and reporting functions, helping improve cashflow and budgeting. And thirdly, you save on overall operational costs by improving efficiency 
• Faster processing times - well integrated payments systems improve payment acceptance rates and overall processing times 
• Operational efficiency - the use of automated payment operations systems cuts down on tedious manual workflows, reduces the risk of human error, and leaves your team free to focus on more important tasks. As well as granting an immediate efficiency boost, this spares your team from wasting time correcting mistakes and improves productivity across other business functions. You’ll also gain a more holistic and accurate view of your operations across the payment lifecycle, enabling better decision-making  
• Happier customers - a well-optimized payment process offers your customers a better user experience, with a streamlined purchasing journey, higher acceptance rates, and fewer errors. You’re also able to offer more popular local and global payment methods, which allows you to attract and retain more customers, and power global growth
• Improved security - by streamlining and integrating your payment operations you’re limiting weak points that could pose an opportunity to fraudsters. Most modern payment systems also employ advanced security measures like multi-factor authentication and data encryption that help to prevent criminals gaining access
• Improved scalability - as your business grows, an optimized payment system can easily adapt to handle larger transaction volumes and the consumer and regulatory requirements of new markets
  

Best practices for payments operations 

With the above in mind, let’s look at what steps you can take to optimize your payment operations. 

Automate payment processes

You should aim to automate as many of your payment processes as possible to improve efficiency and acceptance rates.  

Payment orchestration should be your first step, which involves using a single unified platform to integrate all your different PSPs. This streamlines management and improves the interoperability of each element of the payment process. 

You could also incorporate straight-through processing (STP) and real-time payments (RTP). STP is an electronic transfer process that enables an uninterrupted transaction flow, from initiation to final settlement, without manual intervention. RTP systems allow for instant cash transfers, which can improve cash flow and cut down on delays.  

Finally, automating reconciliation will save you heaps of time when it comes to bookkeeping, and reduce costly errors that could be caused by manual data entry.  

Data security and compliance

Security should also be front and center when it comes to payments operations optimization. Not only will it help to protect your sensitive business and customer data from fraudsters, it will improve your whole customer experience and boost your revenue.  

To do that, you should employ high-level encryption to keep payment data hidden during transactions; implement multi-factor authentication, which uses a combination of security protocols to verify the identity of your customers; and advanced fraud detection, which combines machine learning and flexible rules to accurately identify and block suspicious transactions while increasing acceptance of legitimate purchases. 

Implementing the latest security measures will also help you to comply with industry regulations like ​​PCI DSS for card payments, Anti-Money Laundering (AML) and Know Your Customer (KYC) laws, and GDPR.

Payments analytics and monitoring

Fraud detection, as discussed above, is one of the most vital uses for payments analytics and monitoring, allowing you to transact with confidence while combatting criminality, as well as helping you identify transactions that surpass AML thresholds, so you can investigate further and flag them to the relevant authorities. 

Analytics plays a further role in optimizing your operations by providing essential insights into payments performance that could, for example, help you spot an increase in customer churn (if you’re a subscription business) or a decline in your acceptance rate that could impact your revenue. Then you can take data-backed actions to address any issues. 

Diversify payment options

Offering multiple alternative payment methods is an optimization measure you can implement that will have wide-reaching benefits across your business operations. 

As well as debit and credit cards, you should look to offer digital wallets (one of the fastest growing payment methods), bank transfers, and, if right for your business, emerging payment options like buy now, pay later (BNPL). You should also take the time to research which methods are most popular in the markets where you currently (or are planning to) operate. Some methods are highly specific to certain countries, and offering these localized options at checkout could be the difference between a gained or lost sale. 

However, to be truly optimal, you shouldn’t attempt to offer every payment option under the sun, which could be a waste of time and resources. Just aim to offer the most appropriate options for your business and your customers’ preferences.

Settlement

As it’s the final step, settlement isn’t always the first thing that comes to mind for many business owners when they think about optimizing their payments operations. However, it absolutely should be. Many factors, of course, influence settlement times, but you should try to work with providers or payment methods that offer the most favorable timeframes and that can minimize delays. This can really help improve your cash flow, reduce your risk exposure, and help you act quickly on growth opportunities. 

End-to-end payment processing

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.

What does this mean for optimization? Well, you could spend time investigating the pros and cons of various PSPs to find the most optimized setup for your needs, but that isn’t necessarily the most optimal way to do it. Why not make things simple and work with an end-to-end payment processor that covers everything from processing to settlement?

An unified payments platform gives you maximum visibility and control over your entire operation, and you don’t have to worry about whether or not different systems will integrate successfully. It will also improve data flow and monitoring, streamline management of every aspect of the payment process, and reduce the fees you’d be charged for working with multiple providers.

Choose the right payment partner

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.

So, how do you choose the right one?

There are numerous must haves that could consider, but the main thing is to find a PSP that:

• Offers multiple payment methods
• Improves acceptance rates
• Fights fraud and chargebacks
• Improves customer experience 
• Integrates seamlessly with your other systems
• Is transparently priced
• Is highly scalable 
• And offers, ideally, 24/7 customer service so there’s someone on hand to help when it matters most

As a full-stack, modular payments platform, Checkout.com embodies all these attributes and more, while giving you the flexibility to customize our solution to your specific needs.   

Upgrade your payments operations with Checkout.com

As a full-stack, modular payments platform, Checkout.com embodies all these attributes and more, while giving you the flexibility to customize our solution to your specific needs.   Find out how we can partner with you to enhance your payment technology and operational efficiency.