As the ‘Start-up’ team you are in that enviable position of having no legacy technology baggage. It is merely a case of defining what it is you want (requirements) and building a service to delight your customers.
As the ‘Mature’ organisation looking to improve and 'fix' your payments you will inevitability come up against a significant program of change, most likely with wide-reaching integrations and system influences - all requiring careful and detailed change management. The risks associated with this level of change are often the 'final nail in the coffin' and quickly stifle this much-needed investment.
The net result is often lots of questions and discussions (and quite rightly so!) as to why the change is required. Having looked at this in some depth with our recent Savanti engagements, we’ve had the opportunity to start breaking this challenge down and develop responses to many of the critical problems.
In this first series of three posts, we'll take a look at the fundamental questions surrounding this change. Namely; Why Change? (What Change? And How Change? will be part two & part three)
Your service is not broken, it's relatively stable, and the transactions keep processing. The customers seem happy, so why consider a change and the upgrade of your existing payments infrastructure?
Simply put, you cannot afford not to change. Payments technology is moving forwards at such a significant pace that any retailer not willing to consider implementing change will inevitably be left behind. When this happens, customers will go where the payment process is most natural and where payments have the least friction.
We have seen a significant change in payments technology over the past five years, from the widespread acceptance of card tokenisation to the impact of PCI-DSS compliance. New payments technologies will continually evolve, and there will always be a tension to drive faster and increased reduction in the friction of a payment.
Another way of thinking about the need for change, is to consider what would happen if you don't change?
There is no flexibility in the payments infrastructure. If the environment and the teams are not flexible enough to pivot in response to external forces, organisations quickly become unable to take advantage and cannot ‘out-pace’ competitors in the new areas of technology. Revenue opportunities are missed!
A prime example of this is the readiness of the general market for PSD2 (Payments Services Directive II) changes. The first retailer to truly harness this technology will enable huge gains both in customer experience and the associated operating cost reductions.
Failure of an organisation to respond to this change and invest in a future-proofed payments infrastructure will facilitate the continuation of uncontrolled costs. Are you completely clear on how much payments are costing you? How much of your operational time is spent running your payments infrastructure? If the business operations of your payments infrastructure cost you more than one person's valuable effort per day, then it's too much.
You will miss the advantage of data analytics. With many large UK retailers processing more than 10 million consumer transactions each week, this is 10 million customer interactions you have failed to understand. Each contact made with the retailer is an opportunity to engage. However, card data is sensitive, and you simply cannot use this data without the appropriate and secure protection of this information. Useful customer related data can be obtained from card and sales transaction information, and this data can be used to understand customer behaviour better and support future developments towards loyalty products.
Things stay complicated, risky and expensive. By changing the payments infrastructure and moving away from an often evolved and complex environment, we can enable flexibility and an environment of innovation, customer data insight, operational efficiency and service compliance.
The risk stays low. Change is not always a good thing, and there are inherent risks in the transformation of a sophisticated infrastructure. However, these can be effectively managed and minimised with the use of both experienced resources and a controlled and strategic approach.
While the change can often be challenging, the long-term investment in your infrastructure will enable your organisation to respond effectively to the rapid advances in the payments market.
Operational cost's stay high. You are paying too much for your transaction processing, whether it is the multitude of resources you require to move settlement and reconciliation files around or the costs of manually handling transaction exceptions. You may well have teams of analysts inspecting transactions for suspicious activity, and here your costs will continue to remain high as there is little or no room to reduce your operating costs.
Your compliance is and will stay a perennial technology headache. It is easy to understand the pain of getting to a PCI compliant position, but the often-overlooked issue is staying PCI compliant! If you have sensitive card data within your technology infrastructure, it is critical that you look to secure this data, although old environments make this difficult, complicated and expensive.
However, let’s not dwell on the negatives!
Experience shows that one of the critical benefits of payments technology change is enabling an environment that 'can' change.
I regularly see payments ecosystems that are difficult and challenging to update, often as a result of the short-term priority to 'fix' overshadowing the long-term need to innovate. This results in systems evolving over long periods of time into hugely complex machines, and as we all know complexity breeds risk and cost.
The consequence of this short-term need to 'fix', is that we end up driving customers to pay the way we want them to pay, but as we have seen, the customer will always lean towards the path of least resistance - the way they want to pay.
If your payments journey is not simple, if your customer has to type too much, if your customers are confused, they will merely go elsewhere!
As a net result of the short-term priority to fix, the clouding of the longer term strategy of innovation and combined with the incredible pace of new payments technologies, it becomes nearly impossible to maintain a payments environment which can keep up with customer expectations.
It hence becomes critical that building an infrastructure that can flex, that can pivot to 'smooth the customer journey', and leverage payments innovation is critical to meeting the customer's ever-changing expectations.
...but where do you start with your program of change? Moreover, what exactly is it you are going to look at changing?
We'll take a more detailed look at these points and some of the areas you might need to consider in part two of this series; What Change?
Russell leads the Savanti Ltd Payments team enabling payments for clients across the globe, having extensive knowledge and 'real-world' experience of tier one, two and three merchants, as well as financial issuing and acquirer providers. Russell has successfully delivered strategic payments services to organisations including RS Components, Rabobank, SODEXO, Raphaels Bank, UK Fuels, Tesco Bank, Virgin Money and Travelex Financial Services.
Before joining the Savanti team, Russell lead one of Europe’s most significant retail payments outsourcing programmes, enabling the UK’s largest grocery retailer to benefit from a significantly improved eCommerce and Store based payments infrastructure.