by Vaughan Owen, CMO,

Industry View from

Acquired Payments logo

Payments 2020

In a disrupted reality, there is still hidden value… but it’s not where you expect it to be.


More than ever, businesses need to look to new places to unlock new revenues and margin. This search isn’t new and finding that competitive edge just gets harder. The more efficient the business is, the more it has to search for small incremental improvements to processes, people and systems. Today’s business can be likened to Formula 1 racing teams – always making minor tweaks and improvements because they understand that the sum total of all the small changes can make the difference between winning and losing.


Economists say competition is an essential force in maintaining productive and efficient markets. We see competitive behaviour in politics, foreign relations, sports and relationships. For most people, there is something inexplicably compelling about the nature of competition, and some academics argue that competitiveness is a biological trait that co-evolved with the basic need for human survival.


Nowhere is this more apparent than in the cutthroat world of business. Organisations today do everything in their power to optimise performance and profits. Our desire to win compels us to optimise processes, squeeze supply chains, use technology and any other tools we have to build more efficient, effective organisations. The modern CEO is in a world of change, having to challenge every small aspect of their business, opening their business models to customers and developers, really listening to their feedback and adopting these changes with a view of “try and if you fail, fail quickly, get up and try again”. Every part of the business is up for grabs, breaking tradition, inventing new models and partnerships and squeezing out every last drop of opportunity – these are the changes needed to remain ahead of the competition.


Yet despite our quest to maximise organisations’ competitive advantage, there is one hidden opportunity that remains largely untapped: payments. Today’s CEOs still see payments as a necessary evil, an annoying cost of doing business. And yet every CFO worth their salt will tell you that payments (and the underlying transactions) are the single source of truth in doing business. Lost in layers of old legacy technology is a treasure trove of transactional data that can unlock value for any organisation.


The truth is that payments have historically been seen as an administrative back-office function left to the finance department, whose role is to match payables with receivables and manage payments, reconciliation and disputes. It’s a task largely handled manually, and as a business scales, the payments department grows with it to manage the increased numbers of transactions. In complex industries such as e-commerce, a level of imperfect reconciliation is viewed as normal, disputes are a cost of doing business, and the payments department is simply seen as a necessary cost centre that is required to manage this, and not worthy of much attention.


They say that the phrase “this is how we’ve always done it” contains the seven most expensive words in business. In the case of payments, that’s especially true, and it’s the reason that merchants continue to use legacy payment providers. Some of the more forward-thinking players see the opportunity to automate certain payment functions, reducing staffing requirements and saving costs. However, few have realised that modern payment technologies have the potential to be a silver bullet that provides the competitive advantage they’re looking for, reducing risk, cost and friction while using deeper data to pinpoint new margins and better customer interactions.


Some payments processers have also begun to focus on individual sectors. Payments products are being built specifically for the unique needs of each sector – however, the really great ones are building technologies and strategies for each customer, using customised systems designed to improve authorisation rates, remove customer friction, reduce costs and costly integrations, and escalating customer service challenges.


Successful collections are the life-blood of an e-commerce business and better payment solutions are critical to sustained profitability and its ultimate success. This comes from a deep understanding of the business needs, key to building out new products and solutions that enable the business to grow, extract value and leverage new technologies. Examples are new solutions such as an account updater, which automatically updates the customer’s card details and the resulting token to reduce friction with the customer, or instant settlement, a product that helps businesses increase cashflow by forward-financing their transaction traffic. Ask yourself, does your current payment provider help you do better business? Do they understand your unique needs? And are they simply taking margin, or helping to unlock real value?


Another example is using a custom build of an API to add faster payments to a customer’s platform for the pay-out to customers, supply chain and payroll without the need for batch processing or manual pay-outs. This enables the customer to streamline pay-out processes, saving time and virtually eliminating costly errors. These new services provide valuable new sources of opportunity for merchants to increase the gap between themselves and the competition.


The payments industry is also going through its own disruption, where regulation and near-constant technology disruption are putting pressure on them to evolve. Regulations such as PSD2, open banking and GDPR, coupled with advancing technology such as AI and robotic advice, are driving traditional players towards marketplace banking. This is pushing payments providers to make a choice between being a value-added service provider to customers, or simply being the connection point between customers and third-party providers. Their choice will depend largely on how quickly they adjust to these conditions and their ability to innovate in response. For those that do, the secret to success will be a sincere interest in third parties and taking a fresh look, not only at their marketing models but, more importantly, their operating models and senior management teams. Traditional incumbents, after all, are not as agile as challenger banks and fintechs, caught up in legacy technology and bureaucracy. It will not be a surprise if today’s incumbents are not tomorrow’s leaders.


For those not developing every day and modernising at scale, their days are numbered. This is especially true given that players such as Google, IBM, Apple, Samsung and Microsoft are all exploring the introduction of their own payment platforms, establishing trust by utilising their mega brands and their deep understanding of ecosystems, user needs and subscription revenue models.


So, what does this all mean?


With the boardroom conversation shifting to find better ways of understanding customers and challenging current operating models, payments provide an opportunity to grow your bottom line. Payments remain the lifeblood of any business, and the good news is there is a journey of discovery which is lined with gold nuggets scattered throughout the ecosystem of transactional data. You just need to know where to look and to have the right team to help you unlock it.

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