How payments performance can help FDs to increase revenue and drive margin

By Jonas Reynisson, CEO, emerchantpay. Originally appeared on Financial Director.

Payments is one of the most dynamic areas of technology, and the pace of change and innovation gets ever greater. Businesses across all sectors are continually looking for the next big disruptor within payments, offering consumers ever-greater numbers of alternative payment methods (APMs), as part of their endless quest to optimise the customer experience and drive both loyalty and growth.

The ongoing focus on innovation has brought with it huge benefits for end users, and those businesses that have successfully integrated, localised and personalised their payments infrastructure with the latest innovative technology have gained competitive advantage as a result.

Escaping the hamster wheel of payments

However, whilst innovation is unquestionably a good thing for our industry, the pressure for everybody within the payments eco-system to continually innovate and look to the future, means that we’re now at risk of overlooking the fundamental principles of effective payment processing.

It is all too easy to get caught up in the ‘hamster wheel of payments’, focusing on ‘keeping the lights on’ in the payment eco-system, dealing with regulation, fraud and chargebacks, scheme changes and a wide network of suppliers.

As a result, businesses get trapped in a never-ending cycle, balancing business as usual tasks with the need for innovation, but never really getting to grips with performance and the need to drive maximum revenue from their existing payments set-up.

Putting performance first

One of the areas we spend a lot of time focused on and discussing with our clients is ‘payments efficiency’ or ‘payments performance’.

Each and every organisation’s payment infrastructure differs, so we invest a lot of time at the outset to ensure that we (and our clients) have a thorough understanding of each specific component of their payments process and how it is currently performing. This allows us to work with clients to navigate the complexity of payment processing and identify specific, tangible areas for improvement.

This week we published a white paper, The New Performance Agenda, which argues that businesses need to focus as much on the present as the future; to take a step back and examine closely the performance of existing payments infrastructures, rather than focusing all of its efforts on the never-ending race to innovate.

The paper details ten key focus areas to drive payments performance, from the payment gateway and payment page optimisation, through to managing chargebacks and detecting and preventing fraud. In each instance, we show how businesses across all sectors can make significant improvements to their business (higher acceptance rates, fewer fraud cases, reduced costs etc.) by analysing their current data to make more informed, strategic decisions around performance.

Indeed, driving payments performance is all about identifying and utilising meaningful data, analysing that data, benchmarking it, and then implementing a strategic plan to improve and optimise the given process.

Data-driven decision-making

The type of data across the payment landscape is wide ranging. It includes issuer responses or extended decline information, gateway configuration or transaction type flagging, and acquirer set-up, right through to currency usage and preferred local payment method process flow and responses.

For example, an area of payments where smarter use of data and insight is hugely beneficial is fraud prevention and management. Businesses should be analysing their data to accurately identify root causes of fraud and then to predict patterns of behaviour. By drawing insight from their data in this way, it becomes easier to efficiently manage and reject potentially fraudulent transactions, whilst maintaining, allowing and optimising the right level of deposits to be captured.

Data-driven decisions can deliver significant improvements across the entire payments economy, not just in terms of increasing acceptance but also in improving the customer payment experience.

The benefits of a performance mindset

A number of small tweaks across a payments infrastructure can add up to big operational and financial benefits, something that every FD is looking for. I liken it to the ‘marginal gains’ philosophy that has been deployed by many successful sports teams over recent years, where if you achieve small improvements in multiple areas, it results in a significant advantage overall.

Based on our own experiences within payments over the last few years, across a whole range of sectors, from gaming and gambling through to travel and retail, I believe that performance is set to be the next big play within payments, as businesses recognise the huge cost savings and growth that can be achieved simply by taking a more data-driven, strategic approach to their payments operations.

Future-proofing performance

Given the pace of change and innovation within payments, it’s important to recognise that this focus on payments performance needs to be ongoing.

Nobody can say for certain how payments will evolve over the next five to ten years; therefore, in order to future-proof their payments eco-system and their operations as a whole, it’s essential that online businesses look to establish an agile payments set-up which can flex and adapt to new technologies and enable them to embrace new opportunities.

In practice, this means regular reviews of new payment methods and regulatory requirements, emerging technologies and wider consumer trends. It’s about having an open mindset and an appetite to model and plan for potential future scenarios.

Of course, innovation will continue to shape the payments industry and the business landscape as a whole, but it is those businesses and those that focus on performance across their entire payments eco-system, whether that’s traditional card payments or the very latest APM, that will drive efficiency and grow the bottom line.

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