The COVID-19 crisis has undoubtedly impacted ‘business as usual’ for enterprise organizations the world over, notably forcing a rethink of how firms accept payments.
As cheque books remain locked away in offices, and cash withdrawals continue to decline, digital payments are one of the most important, if not the only, way to maintain consistent cash flow.
However, the payments landscape is complex, leaving many organizations strapped for resources to manage inefficiencies, such as failed and late payments.
A recent Forrester report commissioned by GoCardless highlights some of the payment woes that businesses face when managing recurring payments, woes that have only been exacerbated during COVID-19. Central to the findings is a lack of understanding that payments is a high leverage function.
Despite not knowing what 2021 will bring, businesses should get ahead of the curve and rethink their payments strategy now, to mitigate the risks and see success in the new year.
Payments are evolving: Are enterprises keeping up?
Digital payments are evolving and modernizing at a rapid pace.
In the past year, merchants’ contributions from digital wallets, wire transfers and direct debit have increased, while contributions from traditional methods like cheques have decreased.
While there will always be a need to accommodate the ‘un-banked’ and those that cannot gain access to online banking services, the digital share of wallet is the new normal. For enterprises, this presents vast opportunities and challenges.
Responding to those opportunities and challenges can seem like a mammoth task, especially as payments ‘specialists’ are a rarity within the C-suite or management.
With this in mind, the most cost and time-effective methods of implementing sophisticated payments infrastructure is realized through integrations and partnerships with specialist fintech solutions providers; 5,000 of which exist in Asia-Pacific alone.
However, every business, customer and market is going to have slightly different priorities and needs. Identifying the optimal payment method or solution is always going to be tricky.
Before diving into a payments strategy, an organization must consider what its priorities are and how payments impact those priorities. At GoCardless, we talk about ‘the eight dimensions of recurring payments’, a framework for holistically assessing how payments are helping or hindering your business. Each dimension represents a payment ripple effect, from conversion and cash flow through to churn and cost, revealing fundamental inefficiencies in need of ‘specialist’ attention.
From there, key payment decision-makers can create a strategy based on the most relevant ‘specialist’ solution providers, and the operational optimization they stand to benefit from.
The fragmented landscape for recurring payments causes business operational challenges
Part of the reason why a successful payments strategy often involves third-party solutions is because payments is a complex, high-touch function.
The Forrester report reveals that the average firm has between 20 to 30 full-time employees managing finances, with manual administrative processes, such as matching payments to invoices, are cited as the most time-consuming tasks for 60 per cent of businesses.
Moreover, when COVID-19 struck, many firms were left scrambling to handle the complexities of payments as customer preferences, payment methods and market trends digitally transformed.
Processing payments is labour-intensive for more than half of firms, and aside from impacting cash flow, it distracts teams from important work that moves the needle on strategy and innovation.
While the pandemic-recovery has seen an emphasis on ‘digital transformation’, we are yet to see organizations learn from this unique moment in history. Financial transformation strategies must become central to a business’ continuity plan if they are to survive and thrive in a world increasingly driven by subscriptions, e-commerce and digital payments.
The role of payments in customer loyalty and brand reputation
The rise of recurring revenue payment models can be attributed to a newfound relationship between a merchant and customer. The ability to ‘opt-out’ of a product or service appeals to the modern mindset of ‘usership’ and ‘consumption’ over ‘ownership’, while for merchants, recurring payments ensure consistent cash flow. But poor payments processes damage more than just a business’ bottom line; it damages customer relationships and brand reputation.
Forrester’s report indicates that failed payments play a significant role here. More than 7 per cent of payments fail for nearly half of all merchants; this leads to increased levels of dissatisfaction for 54 per cent of customers.
The recurring payment relationship is one built on mutual trust and consistent delivery. Therefore, every time a payment fails, you are asking a customer to re-evaluate their relationship with your brand. Businesses indicate that on average, 11 to 15 per cent of failed payments result in churn, which is foregone revenue today and in the future.
Emerging payment intelligence tools can automate the collection process; helping to optimize recovery, performance and ultimately allow businesses to focus on managing customer relationships and growing the business.
The modern customer, be they B2B or B2C, is brand agnostic. If you do not have a payments strategy in place to ultimately meet their needs, they will find a merchant who does.
As the world continues to grapple with COVID-19, now is the time to rethink your payments strategy to save your customers and bottom line.