Payments are like in-laws. The more you have the trickier it gets

By Robert Lincolne, CEO and founder of Paydock

This is accentuated in e-commerce where the number of payment methods has exploded – with no sign of abating. Wallet-this, wallet-that, crypto, schemes, real-time banking, the list goes on. Factor in currencies, fee variability, fraud and compliance overheads it’s a veritable Easter gathering, your Aunt’s 60th and a wedding in one.

The atomic explosion of the payments supply chain presents one of the great technical frontiers of commerce today. Fueled by COVID, the family gathering is in full swing.

For small and medium businesses, most of this excitement passes by unnoticed, however for larger businesses each one of these aspects becomes an area of consideration. Either as a risk or an opportunity. Usually both.

However, what does it mean to ‘get it right’ in digital payments strategy? We know getting it wrong can cost millions (if not billions) but that’s only for a single cohort. SME/SMBs have plenty of entry points, with a plethora of options available, each more or less the same as each other. The plugins work, basically payments can be taken and getting started takes only a few hours, if not minutes.

However, these merchants (and all higher up the food chain) should start considering if they haven’t already what is around the corner. This is required if they want to keep costs low, consumer engagement high and not leave profit behind inadvertently.

Payments infrastructure is of course a point in time. What is appropriate for a smaller merchant may not be for a medium size merchant and most definitely not suitable for a large merchant.

As with many things however, where you start from often determines how you go, and where you finish. I’m going to boil down what a healthy payments stack should contain to the following 3 principles:

1. Agile/Interoperable – Losing control of customer data (or having data locked into an immovable silo) is poor business. Especially as access to that data is required to effectively exploit the benefits of the race to the bottom on transaction fees. Other reasons ticking the interoperable box is beneficial is that fraud and compliance services are easier to support due to data accessibility.
2. Scalable – Unless you are a mum and dad shop there will come a time where new services are needed to be supported. The first consideration, vertical scalability means that each node through which a transaction passes can handle spikes. A fit-for-purpose rule of thumb comes into play here. Deploying a critical recurring payment engine into CRM, for example, might not be scalable if you hope to grow the business. This is standard IT best practice. Horizontal scaling however is more interesting. In the payments world, this means reaching left and right to embrace emerging technology. A payments strategy is not scalable if it does not have vertical and horizontal scaling capability. Your current service provider may support a wide range of options, however make sure you’re not falling afoul of the need to remain somewhat independent from any given service provider should their priorities (or pricing) not align with your requirements.
3. Secure – This is a challenging one for merchants as the amount of touch points for data has increased over the years. An effective payments stack will ensure that the ecosystem is, ideally PCI-SAQ-A compliant (meaning card or payments data never touches your servers, and that the input elements used to capture that data are not hosted by the merchant). This resolves the data leakage risk, but not the fraud risk. This is a case by case exercise however ensuring that there is capability in the stack to ramp up and tune a fraud posture is a critical must-have for merchants in their toolbox.

A small note on the above. While not a principle itself, merchants should also aim to be able to effectively audit every touchpoint on their payments experience. The risk of data leakage and poor customer support has never been higher as the number of disparate, yet valuable, services enter the market. Single-vendors go some way by creating a walled garden, but with those walls comes the predictable higher prices and vendor lock-in, an alternative economic downside not every merchant is comfortable with.

If you feel your payments infrastructure ticks these three boxes, then you are well on your way. Efficiently ensuring the right payments strategy is in the water is the degree to which the three principles above can be implemented and maintained without distracting from core business.

One recent innovation in the payments market has been the introduction of payments orchestration platforms (PoPs). These businesses are designed to enable merchants to, as easily as they worked with a single-vendor, dynamically weave together solutions encompassing multiple vendors, ensuring adherence to the three principles above.

Outside of these orchestration platforms it can be extremely expensive, and the cost of not using these is also expensive. So, modern merchants today face an interesting choice. They could either build a stack to support these principles internally (costly) or work with a payments orchestration platform (far less costly). But the principles are rarely disputed and the shift from single-vendor payment strategy to multi-vendor, accessed ‘as-service’ via orchestration platforms is underway.

As we look to 2022 and beyond, merchants can be encouraged, they should expect no reduction in baseline capabilities by their chosen vendor. Merchants who wish to outperform need to look beyond what their single vendor has to offer and with increasing confidence consider the market as a whole.  The principles of interoperability, scalability and security will be a helpful rule of thumb.

By Robert Lincolne, CEO and founder of Paydock

This is accentuated in e-commerce where the number of payment methods has exploded – with no sign of abating. Wallet-this, wallet-that, crypto, schemes, real-time banking, the list goes on. Factor in currencies, fee variability, fraud and compliance overheads it’s a veritable Easter gathering, your Aunt’s 60th and a wedding in one.

The atomic explosion of the payments supply chain presents one of the great technical frontiers of commerce today. Fueled by COVID, the family gathering is in full swing.

For small and medium businesses, most of this excitement passes by unnoticed, however for larger businesses each one of these aspects becomes an area of consideration. Either as a risk or an opportunity. Usually both.

However, what does it mean to ‘get it right’ in digital payments strategy? We know getting it wrong can cost millions (if not billions) but that’s only for a single cohort. SME/SMBs have plenty of entry points, with a plethora of options available, each more or less the same as each other. The plugins work, basically payments can be taken and getting started takes only a few hours, if not minutes.

However, these merchants (and all higher up the food chain) should start considering if they haven’t already what is around the corner. This is required if they want to keep costs low, consumer engagement high and not leave profit behind inadvertently.

Payments infrastructure is of course a point in time. What is appropriate for a smaller merchant may not be for a medium size merchant and most definitely not suitable for a large merchant.

As with many things however, where you start from often determines how you go, and where you finish. I’m going to boil down what a healthy payments stack should contain to the following 3 principles:

1. Agile/Interoperable – Losing control of customer data (or having data locked into an immovable silo) is poor business. Especially as access to that data is required to effectively exploit the benefits of the race to the bottom on transaction fees. Other reasons ticking the interoperable box is beneficial is that fraud and compliance services are easier to support due to data accessibility.
2. Scalable – Unless you are a mum and dad shop there will come a time where new services are needed to be supported. The first consideration, vertical scalability means that each node through which a transaction passes can handle spikes. A fit-for-purpose rule of thumb comes into play here. Deploying a critical recurring payment engine into CRM, for example, might not be scalable if you hope to grow the business. This is standard IT best practice. Horizontal scaling however is more interesting. In the payments world, this means reaching left and right to embrace emerging technology. A payments strategy is not scalable if it does not have vertical and horizontal scaling capability. Your current service provider may support a wide range of options, however make sure you’re not falling afoul of the need to remain somewhat independent from any given service provider should their priorities (or pricing) not align with your requirements.
3. Secure – This is a challenging one for merchants as the amount of touch points for data has increased over the years. An effective payments stack will ensure that the ecosystem is, ideally PCI-SAQ-A compliant (meaning card or payments data never touches your servers, and that the input elements used to capture that data are not hosted by the merchant). This resolves the data leakage risk, but not the fraud risk. This is a case by case exercise however ensuring that there is capability in the stack to ramp up and tune a fraud posture is a critical must-have for merchants in their toolbox.

A small note on the above. While not a principle itself, merchants should also aim to be able to effectively audit every touchpoint on their payments experience. The risk of data leakage and poor customer support has never been higher as the number of disparate, yet valuable, services enter the market. Single-vendors go some way by creating a walled garden, but with those walls comes the predictable higher prices and vendor lock-in, an alternative economic downside not every merchant is comfortable with.

If you feel your payments infrastructure ticks these three boxes, then you are well on your way. Efficiently ensuring the right payments strategy is in the water is the degree to which the three principles above can be implemented and maintained without distracting from core business.

One recent innovation in the payments market has been the introduction of payments orchestration platforms (PoPs). These businesses are designed to enable merchants to, as easily as they worked with a single-vendor, dynamically weave together solutions encompassing multiple vendors, ensuring adherence to the three principles above.

Outside of these orchestration platforms it can be extremely expensive, and the cost of not using these is also expensive. So, modern merchants today face an interesting choice. They could either build a stack to support these principles internally (costly) or work with a payments orchestration platform (far less costly). But the principles are rarely disputed and the shift from single-vendor payment strategy to multi-vendor, accessed ‘as-service’ via orchestration platforms is underway.

As we look to 2022 and beyond, merchants can be encouraged, they should expect no reduction in baseline capabilities by their chosen vendor. Merchants who wish to outperform need to look beyond what their single vendor has to offer and with increasing confidence consider the market as a whole.  The principles of interoperability, scalability and security will be a helpful rule of thumb.