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Unbundling the Payments Value Chain to Improve ROI

As a business professional, how often do you wake up thinking about money?  

OK, maybe not before coffee, but it certainly comes up frequently re: Sales, Budgets, Payroll. Payables, Receivables.  If you’re in Marketing, Sales or Finance, or Operations, even IT, you likely spend most of your working hours on how to make more of it by growing revenue, reducing costs or both.   You may spend days, weeks or even months involved in projects or systems development designed improve the ROI of your portfolio of Customers, your internal Sales team or Channel, your Marketing spend or your infrastructure investments.  But how often do you think actually think about, not metaphorically think about, cashing the check.  

How can that process -- the payments process -- be made more efficient, more user-friendly and more cost-effective? How can payments processes, both incoming (AR) and outflowing (AP) lead to positive ROI outcomes?  It’s a topic that seldom comes up when discussing company strategy or competitive advantage.  Yet there is no process as essential to the any for-profit or non-profit enterprise than the flow of funds into and out of the organization. 

No matter your business, if you need to receive or make any type of domestic or global payments, then removing complexity and cost while improving the user experience reducing the burden of compliance and tax reporting should be on your action list not just on your radar.  If it’s been awhile since you’ve thought about it, the good news is that there’s been plenty of recent innovations that could make doing so very much worth the effort. 

The first step is to review any payments process including every direct and indirect value exchanges in the context of your operational processes and your business strategy.  

Indirect Payment Flows

For many indirect go-to-market business models, a more flexible payments platform can address issues that standard payment process and traditional financial fail to resolve.  Companies may be required to know who their Customer is even if the Company does not (yet) – to comply with Know Your Customer (KYC) regulations among other reasons – without restricting the flow of business to known entities.  

Adding new payees can be done automatically and KYC compliance tasks managed from within the payments platform without the need to hold-up fund transactions.  APIs can be used to link newly acquired Customer info to both a Company and Partner’s CRM tools. Funds received can be immediately designated to a digital wallet assigned to a Customer Beneficiary trackable to what (event) and attributable to the Company using your platform who is responsible for engaging the Customer. 

Aggregating connected accounts enables more efficient money flows and creates new potential use cases to support business models that foster enhanced collaboration.   

Direct Payment Flows

And while these connected account capabilities offer exciting possibilities, even direct payment flows have tremendous ROI potential if the incumbent payments value chain can be modified using a payments platform and APIs to automate payments processes.  The three primary external cost drivers inherent in most B2C and B2B global payment processes include Banking Fees, Card Processing and Currency Exchange along with the often- hidden cost of regulatory compliance, e.g. KYC, AML and tax reporting.    

Each of these cost drivers should be assessed to determine both their external and internal costs. 

The internal costs of managing these disparate elements of the overall payments process must also be reviewed.  The scope of services and supplier trust level, as well as the relative level of automation and sophistication of the end-user Customer Experience, can result in significant administrative overhead.  If you outsource this oversight to a third-party be sure to include those costs as well.   

Payments Platform Flows

Using a payments platform and APIs enables you to embed automated indirect and direct payments received from multiple inbound sources via many methods (card, ACH, etc.) within your business process. 

Within the platform itself, it facilitates the aggregation of funds with proper attribution using connected accounts and digital wallets.  It hosts intra-platform W2W exchanges (wallet-to-wallet); and it manages FX currency exchange wholly within the platform -- at much lower exchange rates than traditional financial institutions.  And, through automation and business process. it manages compliance and tax reporting requirements so your internal teams or third-party firms, will not have to.  

And, finally, the payments platform APIs enable you to disbursed funds directly to anyone, anywhere in nearly any currency while offering a choice of payment methods: ACH, check, prepaid Visa, digital gift cards, etc.

The payments platform generally manages all of these functions for one simple fee.   

Considerable Impact

Addressing your payments process can lead to some handsome returns. First, in process improvements that lead to cost savings from self-serve processes and automation.  But even more importantly, it can lead to UEX improvements which can positively impact customer and partner satisfaction, retention and loyalty. 

Beyond those considerable impacts, cashing the check on payments process improvements requires quantifiable cost savings directly attributed to using an intelligent payments platform. 

Current Expenses (A) less New Process Expenses (B) = Total Cost Savings.  

  • External Expenses
    • Banking Fees -  account management fees, transaction fees, trust and custodial fees, etc. 

    • Card Processing - merchant processing and network fees, etc. 

    • Currency Exchange - cost of cross-border payments

    • Compliance (if outsourced) - Know Your Customer (KYC), Anti-Money Laundering (AML) 

    • Tax Reporting Costs  

  • Internal Expenses
    • Admin hours, IT hours, Management hours required to manage all of the above. 

In summary then, first calculate (A) your Current payments related expenses (External and Internal); then estimate (B) your New Process expenses (External and Internal). Subtract B form A and, voila, you've got the amount for that elusive check. 

Let us know how we can help you achieve these cost saving results. 


It’s Never Too Early to Begin Improving Your (or Your Customers’) Payment Processes

For any business, profitability is the oxygen that fuels growth needed for long term success. Improved profitability, however, comes both from increasing revenue and reducing costs.  Even while you’re focused on new customer acquisition and growing existing accounts, it’s never too early to think about achieving optimal operational efficiency -- and combining better customer experiences with lower costs.   

Improving payment processes may seem an unlikely area for significant impact to profitability; however, it can be an area rich with opportunity, particularly if your business serves others with processes that include moving money among multiple entities.

So, think again about the benefits of embedding improved payment processes via APIs to power the ability to automate self-service functionality for your clients and their customers for multiple use cases to receive, manage and send payments including:  

  • Multi-source inbound payments
  • Aggregation of accounts
  • Intelligent connected wallets
  • Borderless payments
  • Cash and non-cash payments

Receive Multi-sourced Payments 

The ability to accept and manage funds received from customers or partners anywhere in their local currency -- with or without merchant card processing fees -- does not have to incur additional bank fees nor does it require paying banks to handle the currency exchange associated with receiving or distributing payments.  Using intelligent digital wallet architectures, payments can be received in many forms - ACH, wire, credit or debit card - and stored in the digital wallet for disposition. And these funds can be made immediately available for distribution to multiple payees. Payment workflows can be designed to automate both the inbound and outbound flows as a single process while creating all the necessary information for reconciliation, compliance and tax reporting as needed.  

Manage Aggregated Accounts Using Intelligent Connected Wallets  

Using digital wallets also enables simplified aggregation of funds, so that payment flows can be designed to receive, manage and distribute funds to nearly anyone, anywhere on behalf of approved customers and partners.  

While traditional banks can create trust accounts for managing client funds in separate accounts, the expense and internal overhead required to manage these accounts manually creates significant resource costs that in many cases are simply not warranted. Every digital transaction is uniquely identifiable and traceable to source for full transparency.

KYC compliance data can be automated to collect information at both an account and transaction level and processed against multiple terrorist and AML lists dynamically.   Doing so can be a tremendous cost saver as it eliminates the need for the banks to manage any KYC requirements for your payment processes. They simply must have completed the KYC requirements for the ACH account-holders at either end of a payment process to create their account.  A process which, by definition, they have already completed at their own expense, not yours.    

Send Borderless Payments 

Whether your sending payments directly to your business partners and customers or you’re developing a system to manage this on behalf of your clients and their customers, another major cost-driver is conducting business in multiple currencies.  Eliminating wire transfer fees is a significant cost-saver. Enabling your payees to do so as well, yet another benefit of using an intelligent payments platform.

The ability to send payments to anyone, anywhere requires implies the ability to send payments in many currencies.  This can be managed by creating digital wallets in each of the required currencies.

However, in many cases it is operationally more efficient to simply offer a currency exchange -- so that the recipient can manage the transaction and bear the cost of the exchange.  Enabling this to be done while still on the payments platform ensures that they can do so at rates far more favorable than they can if the exchange is completed at their local bank.

Cash and Non-Cash Payee Options

 As mentioned above, enabling payees to select their form of payments can create a better customer experience and eliminate unneeded costs. Cash payments can be made via ACH or wire transfer.

Beyond these cash option, there are alternative payment forms that, if offered,  payees may prefer. These include prepaid Visa debit cards or digital gift cards from major retailers on their country or even PayPal.  

Research shows that recipients prefer choice but, depending on your use case, it may not be appropriate to offer.   You can direct payments to any singular choice as needed. And while, recipients report that they prefer choice, the vast majority (90%+) will elect the cash options.  

Offering choice is also central to the automated self-service capabilities that make the customer user experience for payees optimal by giving them control.   They control their information completing KYC and tax compliance data when/if needed as part of transaction -- rather than upfront when many find requesting such data as intrusive and often will not provide.  Likewise, if offered the choice of how to receive payment they once again are offered some control of their  benefits.  And lowering barriers to customer usage and utilization is critical to achieving the user acceptance needed to realize all of the cost savings inherent in the automated processes using an intelligent payments platform.

These are but a few thought starters.  The real question is: How are you going to improve your payment processes to lower costs, optimize efficiency and improve profitability starting now?   

We’d love to help.