eCommerce Payment Industry Trends—Are You Ready?
How does your company view the payments function? As a competitive advantage? A necessity? Or maybe even a burden? Rene Pelegero from RPGC Group spoke with Brian Billingsley, CRO of Modo, and Eric Morse, SVP Sales at Affirm about the importance of payments to merchants and why merchants should be using payments to their advantage. You can check out the full webinar here on BrightTalk, or continue reading below for an overview of the discussion.
Payments are the lifeblood of companies, as Rene Pelegero from RPGC Group strongly puts it. Without getting paid there would be no business. More and more merchants are recognizing the strategic importance payments have on their bottom line. One recent example includes the multiple paragraphs on Payments Processing Initiatives in Lyft’s S-1 filing covering issues from adding payment processors and reducing transaction fees to ensuring their customer experience isn’t altered by the payment process. From enhancing customer experience, supporting customer expansion, and delivering lower operational cost, payments can have a tremendous impact on a business.
The Payments Mess
Let’s start from the beginning of your company’s online journey. You created a great website with an outstanding user experience to get your customers to buy your product. You have one single processor to get the funds from those sales. Everything is going well. So well, in fact, that you start looking into adding more payments relationships - another processor to help you enter into a new market or connections to payment methods like PayPal, Sofort, or Oxxo that help you reach new customers. Oh, and then you realize you need to build connections to multiple fraud and risk providers as well in a layered approach that looks similar to your multi-PSP strategy. Each one of these integrations is vital to your business, but they each add to the spaghetti mess of connections in your payments operations. Sound familiar? You have to be able to take payments in order to make money, but it can become so complicated. How does your company handle the payments function?
Copyright RPGC Group
The Payments Function
Merchants need to think of payments as an asset, yet many merchants aren’t looking at it that way. They see payments as a burden or simply a necessity, and give it little support or investments. Even merchants that look at payments as a utility short the value payments bring to a company’s operations.
Payments are a differentiator and deliver a competitive advantage. And when companies see that, they treat payments as an asset and invest in the technology and the people in the payments function, and ultimately turn payments into a revenue generator.
“Your job as a #paymentsgeek is to raise the awareness of payments in the organization.”
- Rene Pelegero, President and Managing Director, RPGC Group
During the webinar, Rene asked viewers to respond with how their companies think about the payments function - from a burden to a revenue driver. Half of the respondents saw it as a necessity - only one step better than a burden.
Why Payments Matter to your Business
There are three main goals that merchants are trying to accomplish:
- Enhance customer experience
- Support customer expansion
- Deliver lower operational cost
We spoke earlier about the complicated mess that payments can become as more payment services are added to the stack. This mess doesn’t start and end in the front-end. The back-end and back-office are immensely affected by those connections.
Enhance Customer Experience
Making the checkout process more convenient will reduce friction and dramatically improve the customer experience. The key is to offer payment methods that are relevant to each customer based on their demographics and geographic location.
“Each local market has such ability to optimize to reach the most consumers in the way that they want to pay. When you go global it’s really important to think locally about how you want to reach the consumer. Because if you just go in and say you’re going to turn on Visa, Amex, Mastercard, and Discover you may miss an entire segment of the population, or you may be viewed as not really understanding the market.”
- Eric Morse, SVP Sales, Affirm
Ever heard of Boleto? Qiwi? Maybe Konbini? These are all relevant payment methods around the globe. When it comes to making connections to all these new forms of payments, it may seem like “the juice isn’t worth the squeeze,” as Modo CRO, Brian Billingsley, likes to say. But there are payments platforms that allow for quick connections to these new APMs, so you can test and learn which payment offerings are right for you and your customers without spending expensive political capital or IT investment.
Support Customer Expansion
Payments can be used to “move people through the checkout experience” explains Eric. Payment offerings can attract new customers and reduce churn for customers already in the funnel. Not only does this happen by offering geographically relevant payment methods, but it allows you to engage customers who previously thought your product or service was unattainable. By adding credit options like Affirm to your checkout, customers can now split payments into something more manageable and budgetable. Leveraging new payment methods that attract customers can help you transform payments from a cost center to a profit center.
Deliver Lower Operational Cost
Even as a #paymentsgeek, it’s sometimes hard to know your true cost of payment per transaction. You end up with multiple settlement files for the different providers, you do the same reconciliation function multiple ways, and work in multiple portals for refunds, chargebacks, and customer service. You usually have a general idea what your total fees will be at the end of the month, but breaking down those fees can be difficult and time-consuming. Yet, optimizing for these complexities can reduce operational cost dramatically. There are payments platforms that allow you to see your total cost per transaction and help manage SLAs with partners, assuring you’re getting the best value.
Rene advises clients to model their “Total Cost of Payments.” Merchants should take the time to identify what elements they want to include in the model: cost of chargebacks, cost of processing those chargebacks, labor to manage the chargebacks, etc. Not only will this model help you see the cost associated with payments fees, but it will likely open your eyes to other processes of the company.
“True #paymentsgeeks have a good perspective into the total operation of the company. When you begin to go down that route, payments begins to add value to the company, and you begin to make senior execs understand the value of the payments function you provide.”
- Rene Pelegero, RPGC Group
Next Steps for #paymentsgeeks
It’s time for you to evaluate how you see the payments function at your company and look for ways to optimize your payment operations. You may be hesitant to add new payments connections because of the complexity that comes with building and maintaining your payments stack and the additional back-end workers required to thumb through spreadsheets. But with the right payment partners, you can build a world-class payment stack without additional operational support needed to scale it. The payments opportunities around the world are growing - just like your opportunities to reach new customers across the globe.
“Payments are tremendously important to any merchant. Without payments, business comes to a stop.” - Rene Pelegero, RPGC
So get out there, #paymentsgeeks, and use your payments knowledge to raise awareness of the payments function throughout your organization, and know that you have the support of the #paymentsgeeks at RPGC, Affirm, and Modo along the way.