Payments are often mislabelled as a cost center and viewed as little more than a necessary process to collect customer funds. As a result, they frequently get put to the back of the corporate mind as an afterthought.
That’s changing, though. Businesses with a growth mindset are reconsidering the role of payments as an engine for growth. And that with the right strategy, they can use payments to drive additional sales, improve margins, and manage risk.
Many companies with this perspective are adding an infrastructure layer to empower their strategy.
Take ZIP, the innovative buy-now-pay-later provider. Zip has recently started to use Primer to power its payments strategy. Its Global Head of Payments and Partnerships, Nitin Kashid, joined me recently in a webinar to explain why.
For Nitin, an open and agnostic infrastructure makes managing a series of interconnecting payment services much more straightforward, improving performance, driving distribution, and reducing cost.
“It's a huge difference when you use an infrastructure layer,” he said. “It's not just about routing the transaction for the payment but absolutely everything you manage around your business on the payment side. We struggled to maintain all our connections because there was no centralization of all those processes. Having risk and fraud tools across different payment service providers and not having that central view and dashboard is a problem.”
Nitin also pointed out that Zip can drive operational excellence and cost savings through Primer, particularly around arduous processes such as reconciliation and chargebacks.
Guiding customers to the most cost-effective payment method
Despite payments not being a cost center, no business will turn its nose to reducing the cost of processing payments. There are many levers businesses can pull to do this when using an infrastructure layer, such as routing through different processors.
However, a factor that sometimes gets overlooked is the impact of accepting different payment methods. While favored methods should always be offered, Mark Beresford, Director at Edgar, Dunn & Co, suggests companies can reduce card payment fees by using rewards to steer people towards the most cost-effective method.
“If you're trying to change customer behavior at the checkout, you have to incentivize them to choose the appropriate payment method,” he said.
“It could be as simple as offering loyalty points or rewards to go down a certain route. So, particularly in North America, people use their credit cards to get air miles. If you're a retailer, you may want to incentivize them by giving your own loyalty or reward points to use a debit card instead, which might be a few basis points cheaper.”
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Making the case to the CFO
According to Primer’s CFO, Pierre-Edouard Jumel, it’s this level of fine-tuning that’ll get the attention of the C-suite. He also joined me on The Payments Manifesto webinar, to sum up how payments teams can present their cost reduction benefits to a C-suite that may be unaware of their impact.
“When I talk to my peers, I realize that payments are probably still too often seen as this complex process at the end of the customer journey,” he said.
“But payment is everywhere and should be at the core of any strategy to enhance the online shopping experience and improve financial KPIs. The key takeaway is that payment has a direct impact on the bottom line, on governance, and, therefore, on value creation for shareholders. And I can guarantee that CFOs are extremely receptive to this discussion.”
When payment teams can explain and demonstrate the improved sales and cost benefits of a successful strategy, they will get the attention of the C-suite. Then, just maybe, they can ensure they’re seen as cost cutters, rather than a cost center and engines of growth, rather than an afterthought.
Unpacking the true ROI of payments
Getting the right technology and networks set up for each market can take time and experimentation, but it can pay huge dividends when it brings significant cost savings. An infrastructure layer can also boost margins and facilitate the introduction of advanced payment tactics that boost revenue.
That’s why we’ve built an ROI calculator to empower businesses to understand the total cost of ownership of a payment configuration against the revenue it will bring in. It gives businesses a fuller picture than just looking at cost in isolation.
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