Business
The butterfly effect: the concealed inefficiencies of payments infrastructure
By Gavin Waddell, payments specialist at Modulr
From leisure and hospitality to marketplaces, retail and travel, it has been – and continues to be – a challenging time for many businesses looking to rebuild after COVID-19. Adapting to market changes, attracting and retaining customers, and staying ahead of the competition have never been more important.
Getting back on track will require a heavy workload. But implementing relatively small changes can have a significantly positive impact on business without adding to already overflowing to-do lists. There’s one place in particular where many are currently losing out and could benefit from marginal gains – payments.
Concealed payments inefficiencies
Often overlooked, many businesses are falling victim to outdated, inefficient payments infrastructure that requires manual processes, file uploads and complex payment flows. But this reflects badly on an organisation’s ability to provide customers with the seamless experience they have come to expect from products and services all using real-time data.
The same research shows payment processes cost businesses a hefty £1.5 million each per year on average. And 64% expect these costs to increase over the next two years. With little-to-no automation and integration, many payment procedures are fractured and laborious.
Research conducted in late 2020 found 62% of payment professionals believe the hidden costs of current payment processes actually overshadow the hard costs (i.e. known costs like salaries and overheads), with the impact on customer experience and brand reputation cited as being the most harmful and costly – beyond that of the known £1.5m price tag.
It’s clear that a poor payment strategy is not something that can be put on the backburner. The impact on wider business mechanics can be detrimental. Companies must not undervalue efficiency or underestimate the importance of maintaining a frictionless service for customers, particularly in a hyper-competitive economy.
The butterfly effect of payments
Addressing the hidden inefficiencies within existing payments processes should be a priority for companies looking to adapt swiftly and effectively while attracting and retaining customers. Implementing these changes can have a considerable impact on front-end outcomes, including the all-important customer experience. This is called the butterfly effect of payments.
A good example of a butterfly effect of payments at work is batch-processing Faster Payments. A payments professional from a money account provider told us of the switch they’d made from batch processing Faster Payments every four hours with their previous payments partner.
The uncertainty customers faced when they were not immediately notified the payment had been received caused them to chase customer support, harming their brand but also costing their customer support team time and resources.
By moving to single immediate Faster Payments, they were able to serve up webhook notifications instantly which solved the problem outright.
Leveraging the butterfly effect of payments
To best take advantage of the butterfly effect of payments, organisations should implement a solid API framework into their payments architecture, either in-house or sourced through an external platform.
API-enabled payment processes are easily integrated and provide companies with faster and more reliable ways to move money. Through a powerful API, businesses can automate payment flows, embed payments and build entirely new payment products and services, managed in real-time, all the time. By following the principles of the butterfly effect and embracing API technology in the back-end, organisations will benefit from reduced operational costs and an improved customer experience.
Don’t lose out
Companies across all industries must remember that to stay competitive in the Instant Economy, they need to provide the ultra-fast and super-efficient services today’s customers expect. By following the butterfly effect and embracing real-time, API-validated services can create effective transaction models for clients and pleasing customer experiences.
Those that delay, will run the risk of losing out on invaluable business as we emerge from the rubble of the pandemic and begin our new normal.
We recently spoke to 40 industry leaders on how they’re taking advantage of the butterfly effect and overcoming the payments dilemma. Read their experiences and top tips on how they’re getting ahead.
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