Why should you accelerate your payment modernization program?
With inflation, rising costs of business and lingering uncertainties stemming from recent political and health crises, companies are taking a hard look at what they're doing today to ensure they're in a position to endure and thrive in the months and years ahead.
With efficiency and agility the order of the day, there's a lot for businesses to consider. However, one area that doesn't usually get the attention it deserves, especially when considering the impact it can have, is payments.
Payments is an area untouched by innovation in many businesses; they're using the same solution in the same way as when they first started selling online. There's a good reason for this: payments are inherently complex. As a result, payments has gained a reputation as a cost center and a place where the mindset of “if it ain't broke, don't fix it” persists.
In years gone by, this was correct. Payments were complex, solutions were inflexible and costly to maintain and making any changes was painful. But that's no longer the case. With modern payments solutions, businesses can cut through the complexity. And when they do, a host of operational and process efficiencies emerge that have a compounding effect across business areas.
Leave the legacy behind
New and old don't mix well. Payments must be optimized for the digital-first era and reflect consumer buying habits and the needs of ecommerce. If you don't evolve, you can't compete with businesses that have upgraded to platforms that can capture more revenue, process more actionable data and maximize operational efficiency.
In short, it's a mistake to maintain legacy payments while modernizing other parts of a business. An effective payments structure is a cornerstone of your operations, and if it's not optimized for today's marketplace and consumers, you'll undermine overall performance. Business managers must overcome the fear of change and realize it's costlier and riskier to play it safe and stick with legacy solutions.
Inefficiencies will multiply and risks will accumulate. There’s a compounding effect that will damage a business in ways that are not always easy to spot. Some businesses may discover they have a problem only when they try to add new payment methods and find that integrations fail or take longer and cost more than expected. A legacy system will always be a drag on your business, and even if problems are not immediately apparent, there is an opportunity cost from not migrating to a scalable modern system that promises long-term benefits.
Optimizing payments reconciliation
Accurate and timely reconciliation is one of the benefits of modern payments. Often undervalued, automated payment reconciliation can have a very positive effect on operational efficiency and financial health. However, because of a lack of awareness and the misconception that it's a low-value bookkeeping task, reconciliation remains an untapped opportunity for many businesses.
Making piecemeal changes to legacy structures is a bad idea. It can be both time-consuming and costly and create operational problems and points of failure because different systems may not be interoperable. If you want to expand overseas and your backend is a complex mix of systems rather than a cohesive and purpose-built platform, inefficiencies will multiply and compound.
Reliance on manual processing and spreadsheets is time-consuming and prone to errors, but payments specialists can achieve significant performance gains by optimizing reconciliation with the latest technology. The goal is to see a complete picture of all payment activity over a set period—perhaps even daily—and use data analytics to reveal what’s behind the figures.
Don't forget authorization rates
Another advantage of a modern payments structure is that it can boost authorization rates. As ecommerce and cross-border transactions increase and payment methods diversify, merchants must optimize consumer journeys and payments acceptance. When a payment is accepted swiftly and efficiently, merchants and their customers benefit.
Authorization is the last leg in the payments journey, and no matter how smooth the process has been up to that point, the sale may be lost if authorization is declined. According to LexisNexis research, although fewer than 50% of those surveyed say they take steps to reduce the number of failed payments, a failure rate of just 5% or above is deemed unacceptable.
Not only does poor authorization impact sales, but it also dents customer experience and will take time and resources to resolve if there are false declines. This may involve dunning, a protracted collection process that is a costly and administrative burden.
Turning payments from a cost center to a value driver
Payments today must be built for ecommerce, globalization, the new regulatory environment and the expectations of digital-first buyers who have grown used to customer-centric innovators such as Apple and Netflix. If you don't have a modern payments platform and a trusted payments partner, you'll hold your business back and compromise growth and customer relationships.
You must act strategically and build payments as a service: a value-added service to your customers and a core service to your business. Payments must be real-time and cross-border. You must gather and analyze payments data to improve customer focus and overall operational efficiency.
A modern payments platform can accurately track the flow of money in and out of the business, evolve to meet new needs and provide true market intelligence and insights to protect revenue and boost the bottom line. That's why business modernizers with a strategic view of payments will be the winners in the ecommerce era.