Do Bruce Parker (Modo CEO) and Scott Harkey (Chief Strategy Officer & Head of Payments at Levvel) really want to talk about corona? Not at all. Corona has affected the payments industry in numerous ways that literally no one saw coming (except maybe the writers for the movie Contagion). But, being the #paymentsgeeks they are, they did want to talk to the industry about what companies can do to prepare their businesses now for the world post-corona.
We’re all doing things on Zoom now. Everything is digital. The way we work is different. The way we buy is different. The way we make decisions is different. So there seems to be only one thing that has remained constant - and that, of course, is change. Digital transformation has been a buzzword for some time now, but have companies actually taken the steps to make that change? To remove themselves from “the way it’s always been done” in order to make their company more adaptable and flexible?
“Any sort of change allows room to disrupt the status quo.” - Scott Harkey, Chief Strategy Officer & Head of Payments, Levvel
It seems that not many companies have adapted. But as Scott and Bruce have found, the companies that were focused on their adaptability before corona are in for a smoother ride than those that weren’t. And that brings us to our first step in preparing your payments in a world post-corona.
Step 1: Ensure you’re Adaptable
Scott gives us two stories to explain how he’s seen payments adaptability play out during this pandemic:
The first story is about a startup Levvel works with, called Cloosiv, that builds mobile ordering specifically targeted at coffee shops. They had been getting traction over the years, but when the lockdown was instituted, their volume exploded. Cloosiv was successful because it was built into Square and didn’t require any new hardware or contracts. It was essentially a flip-of-a-switch to turn on, which is much more adaptable than technology with a very long onboarding process.
Right now, you can clearly see the difference between restaurants who had already been using digital as a channel versus those restaurants that hadn’t. The ones that had a digital experience had a more streamlined transition, and it was easier for them to move all of their orders to mobile. Restaurants that never had a mobile app or online ordering had a much larger hurdle to jump in a very short period of time, and they have been suffering because of it.
“It’s not the things you know of that you need to plan for, it’s the things you don’t see coming. And what ultimately allows you to be ready for those is building flexibility, adaptability, etc into the product.” - Scott Harkey, Chief Strategy Officer & Head of Payments, Levvel
Scott’s second story is of his experience with his telecomm company. He needed higher bandwidth when he started working at home, and had an awful experience as the company struggled to set up the system. Instead of it being an automated, self-service experience, it was centered around a technician coming into his home and installing the new service. But home visits aren’t an option now. They didn’t plan for flexibility, and didn’t plan for digital. Definitely no “flip of a switch” solution here.
Bruce added in the idea of “cloud” for payments infrastructure. Before corona, companies recognized that it would save costs and create efficiencies to move to the cloud. Now, servicing infrastructure has become extremely difficult because of the restrictions. Companies are realizing instead of being a “nice to have”, cloud has become a necessity.
Takeaway: Build your technology to be flexible. Think “flip the switch”.
Step 2: Reduce Costs
We don’t mean to state the obvious, but here we go: revenues have been greatly affected by the pandemic. Because revenues are down, looking to lower variable costs is high on the to-do list for many companies. While reducing costs has always been a top priority for companies, the pandemic has brought a new focus on it. One way companies have reduced cost is by furloughing employees, which we hope is a last resort.
Scott and Bruce laid out some other avenues to venture down before laying off employees:
- Optimizing your Stack
- There is a lot of optimization that can be done in the payments stack. Moving your payment operations to the cloud is one of the most popular strategies right now. Cloud infrastructure allows for scalability (aka when they use less, they pay less) which means that in lean times, businesses aren’t still paying a high cost for infrastructure.
- Many contracts in business are longer term contracts, and there is no “turning them off” when times are tough. This means businesses need to look for ways to repurpose those contracts with vendors - whether that be reusing contractors for different projects or being creative about selling physical items from your business that you no longer need because customers aren’t visiting your store (i.e. toilet paper). We’ve seen a ton of creativity coming from companies looking to repurpose their products and services to reflect what the market is looking for. When you can get out of a contract, switching to a shorter term contract is an obvious measure of cost reduction.
- You should also look towards the tools your company already has and make sure you’re using them to their full capacity. You might be using only 20% of the features a tool offers and can negotiate rates to add more features of this tool to your contract at a lower rate. In the longer term you can look to restructure contracts, but in the immediate term, you have to get creative about leveraging the tools you already have.
- For the longer term, there are several options you have to reduce your total cost of payments acceptance. Adding in cheaper payment methods, such as bank transfers, is one easy way to do that. There are also ways to route between payment processors to get better prices. Starting these conversations now is going to put you in a better position in the future. As an example, a Levvel client put together a business case showing that internal bank transfers saved them $10 million a year in costs.
Takeaway: Keep people employed, and get creative about using the tools you already pay for.
Step 3: Increase Channels
For a long time, digital was seen as a means for growth. Companies could sell more by adding ecommerce as a channel, and because of this they looked at sales made on digital channels as incremental and didn’t focus too much on the margins of those sales. Now, digital is the channel, and that experience needs to be thought through. Companies have to be prepared to reach customers through any channel at any time.
“It can be any channel at any given time. You don’t know, and you can’t optimize for one in a way that disadvantages the others. What things like this show is that you don’t always have control over where it goes, so you’re better off accounting for the multi-channel, omnichannel, all-the-channels approach in a way that you think about, whether it’s your infrastructure or your contracts or your approach, accounting for all of them and allow you to adjust based on where your demand is.” - Scott Harkey, Chief Strategy Officer & Head of Payments, Levvel
The cost of a card present (in-person) transaction versus the cost of a card not present (digital) transaction can be drastic, especially when the digital platforms have to be set up quickly. The card not present (CNP) transactions can be incredibly expensive, but because these companies weren’t set up for digital transactions beforehand they are eating that cost in order to stay in business. Companies that already had a digital strategy had more time to negotiate for better rates and look for the platforms that were going to best serve their business. Building your business for flexibility is going to allow you to have more options and avoid these “prisoner scenarios” where you have to do something because you weren’t prepared.
“You don’t want to be figuring out how to adapt when you have to adapt. You want to be figuring that out before you need to do it.” - Scott Harkey, Chief Strategy Officer & Head of Payments, Levvel
Takeaway: Every channel is an important channel, and be prepared for any of them.
Bruce and Scott are both optimistic about the future. The disruption caused by COVID-19 will bring needed change to technology and businesses, and allow them to be more resilient and responsive to these kinds of challenges. While the impact has been devastating, we’re excited to start the path towards rebuilding.
The three steps shared by Bruce and Scott can be taken right now to prepare your company for a world post-corona: 1. Ensure You’re Adaptable, 2. Reduce Costs, and 3. Increase Channels. Being flexible with platforms, payment providers, and channels will allow companies to react more quickly in the future when plans are forced to change. Because, just as Scott said, you have to plan for the things you don’t see coming. Make sure your company is prepared for whatever may be coming next.